xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink" xmlns:a="http://ns.ado- be.com/AdobeSVGViewerExtensions/3.0/"
x="0px" y="0px" width="141.732px" height="14.173px" viewBox="0 0 141.732 14.173" enable-back- ground="new 0 0 141.732 14.173"
48
From CSR to Inclusive Business Table of Contents X. Annex 3 – References
Almuttaqi, Ibrahim (2013): ASEAN’s role in Corporate Social Responsibility. The Jakarta Post
LIST OF ABBREVIATIONS AND ACRONYMS 04 Asian Development Bank (2013): IB Impact Assessment Tool, http://www.inclusivebusinesshub.org/wp-content/uploads/ 2015/05/ADBSept2013IBimpactAssessmentToolforPHI2.pdf FOREWORD 06 ADB and SNV (2013): Developing the Business Case for Investing in Inclusive Business in Indonesia – A Market Scoping Study
I. CHAPTER 1 – ABOUT THIS STUDY 08 Center for Ethical Business Cultures (CEBC) (2005): Corporate Social Responsibility The shape of a history, 1945 – 2004: History of Corporate Responsibility Project Preliminary project planning paper 2005 Working Paper No. 1 Objectives 08
Respondents 08 Cornel B Juniarto, Hermawan Juniarto, Andika D Riyandi (2012): Corporate Social Responsibility Regulation in Indonesia. IBA Law Firm Management News Why corporate social responsibility is important for companies and sustainable development 09 Dees, J. Gregory (1998): Enterprising Nonprofits. Harvard Business Review: January – February 1998 Strategic corporate social responsibility and inclusive business 10
CSR 2.0 11 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2011):Corporate Social Responsibility and International Cooperation Inclusive business 12
Methodology 13 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2014): Responsible and Inclusive Business Hub SEA, Inclusive Business Mapping in Indonesia
II. CHAPTER 2 – DRIVERS OF CORPORATE SOCIAL RESPONSIBILITY IN INDONESIA 14 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2013): Inclusive Business Models-Options for Support through PSD Programmes Tradition and cultural expectation 14 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2015): Inclusive Business Toolbox-Promoting Regulation 14 Inclusive Business Models in Development Cooperation Programmes International corporate social responsibility guidelines 16 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2011): Promoting Inclusive Business Models for Sustainable Development-Experiences of German Development Cooperation III. CHAPTER 3 – ANALYSIS OF THE SAMPLE: GENERAL FINDINGS 18 European Commission, Directorate-General for Enterprise: Corporate Social Responsibility Awareness-raising questionnaire. Activity spectrum 18 https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0ahUKEwigr-WMqMXOAhVEtJQKHW Becoming more strategic 19 VlD54QFggqMAI&url=http % 3A%2F%2Fec.europa.eu%2FDocsRoom %2Fdocuments%2F10369%2 Fattachments% 2F1% 2Ftranslations %2Fen%2Frenditions%2 Fnative&usg=AFQjCNHgq142dHK6sJ--9PTkg20ZGbJqHA&cad=rja Five success factors 23 European Venture Philanthropy Association (2014): European Venture Philanthropy and Social Investment 2013/2014. The EVPA Survey IV. CHAPTER 4 – INCLUSIVE BUSINESS AS STRATEGIC CORPORATE SOCIAL G20 Development Working Group (2015): Annexes to G20 Inclusive Business Framework RESPONSIBILITY 29
Inclusive business case studies 29 Gentile, Federica (2014): Corporate Social Responsibility Regulation in Indonesia. Ubi Business
Opportunities 33 Gradert Marie and Engel Peter (2015): A Comparison of 4 International Guidelines for CSR, Danish Business Authority
Challenges 33 Hendeberg Simon and Lindgren Fredrik (2009): Bachelor Thesis: CSR in Indonesia - A qualitative study from a managerial Inclusive business potential 34 perspective regarding views and other important aspects of CSR in Indonesia
47
From CSR to Inclusive Business IX. Annex 2 – Regulations V. CHAPTER 5 – CONCLUSION AND RECOMMENDATIONS 35
1. Limited Liability Company Act No. 40 of 2007. This law requires companies that work with natural resources to implement VI. CHAPTER 6 – CSR ASSESSMENT TOOL 37 social and environmental responsibility. These costs are to be budgeted and accounted for as cost companies.
2. Decree of the Minister of SOE Per-05/MBU/2007 on the Community Development Partnership Program (corporate VII. ABOUT THE AUTHORS 43 social responsibility). This decree establishes the state-owned enterprises (SOEs) to conduct a programme to strengthen small businesses through the provision of revolving funds and social assistance and through empowerment of VIII. ANNEX 1 – PARTICIPANTS IN BRIEF 45 community funds taken from the profits of SOEs.
3. Government Regulation (PP) No. 47 of 2012 on Social and Environmental Responsibility. This is the implementation provisions of Law No. 40/2007, Article 74 concerning the obligations of companies working with natural resources IX. ANNEX 2 – REGULATIONS 46 to implement social and environmental responsibility.
4. Investment Law No. 25 of 2007. Article 15 (b) of this law states that ‘every investor is obliged to implement corporate X. ANNEX 3 – REFERENCES 47 social responsibility’.
5. Law on Oil and Gas No. 22 of 2001. Article 13, paragraph 3 (p) of this law indicates that in the manufacture of Cooperation Contract shall be loaded principal provisions regarding the development of the local community to protect the rights of indigenous peoples.
6. Law No. 13 of 2011 on Poverty Management. This law does not focus specifically on CSR, but there is a clause that one source of funding in the handling of the poor is of the corporate sector.
7. Minister of Social Affairs Regulation No. 13 of 2012. This regulation covers the responsibility of the business forum in the implementation of social welfare. The regulation recommends creating the CSR Forum at the provincial level as a means of establishing partnerships between corporations and the government.
46
From CSR to Inclusive Business LIST OF ABBREVIATIONS VIII. Annex 1 – Participants in brief AND ACRONYMS PT. Sinar Mas, Tbk – downstream A division in Sinar Mas Agri-Resources and Technology (SMART) involved in processing all crude palm oil into value added products such as oleochemicals, palm cooking oil, margarine, and any other fat and oil products. ADB Asian Development Bank It currently has seven facilities around Indonesia (Surabaya – East Java, Marunda – DKI Jaya, Belawan – North Sumatera, Sampit – Kalimantan, Tajun – Kalimantan, Kotabaru – Lampung) APINDO The Employers’ Association of Indonesia / Asosiasi Pengusaha Indonesia http://www.smart-tbk.com/ BMZ German Federal Ministry for Economic Cooperation and Development PT. Adaro Indonesia, Tbk BOP Bottom of the Pyramid One of the largest local mining companies with a coal mining concession mainly in the Tabalong district, South Kalimantan. The company has mined and hauled for more than 20 years and current production amounts to 55 million tonnes annually. CEO Chief Executive Officer http://www.adaro.com/operation/our-operating-subsidiaries/mining-assets/ COT Centre for Occupational Training PT. HM Sampoerna, Tbk CSR Corporate Social Responsibility One of the largest tobacco companies in Indonesia producing kretek-clove cigarettes and white paper cigarettes. It is known for its Sampoerna
EVPA European Venture Philanthropy Association and Dji Sam Soe brands. In 2005 the company was acquired by Philip Morris, which owns more than 90% of the company. http://www.sampoerna.com/id_id/pages/homepage.aspx GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit PT. Adis Dimension Footwear GRI Global Reporting Initiative A long-established shoe manufacturing company working with the Nike and Adidas brands. It currently employs more than 6,000 workers in
IB Inclusive Business its facilities in Tangerang, West Java. adisdimensionfootwear.id/ ICT Information and Communications Technology PT. Pacific Place Jakarta ILO International Labour Organization A property company who manages and owns Pacific Place mall in Jakarta. The mall consists of Pacific Place mall, the One Pacific Place office ISO International Organization for Standardization centre, and the three-tower Ritz-Carlton Pacific Place hotel. The mall opened in November 2007. http://www.pacificplace.co.id/ MNC Multinational Company PT. Unilever Indonesia, Tbk. MNE Multinational Enterprise One of the biggest consumer products manufacturers in Indonesia. It was established in 1933 in Indonesia and its main products are food, personal NGO Non-Governmental Organisation care and home products. PT. Unilever Indonesia Tbk is a part of Unilever Group NV/PLC and produces, manufactures and sells most Unilever brands (Surf, Close-up and Clear, etc.) and some local brands such as Kecap Bango and Sari Wangi tea. OECD Organisation for Economic Co-operation and Development https://www.unilever.co.id/ PBSP Philippine Business for Social Progress PT. Trimitra Baterai Prakasa PHBS Pola Hidup Bersih dan Sehat / Clean and Healthy Lifestyle One of the largest automotive battery exporters in the South-East under the brand G-Force. The company was established in 1991 and the facility is located in Cilincing, North Jakarta . RIBH Responsible and Inclusive Business Hub http://www.trimitra-baterai.co.id/
04 45
From CSR to Inclusive Business From CSR to Inclusive Business Deutsche Gesellschaft für Internationale Zusammenarbeit SDGs Sustainable Development Goals (GIZ) GmbH SED-TVET Sustainable Economic Development through Technical and Vocational Education and Training Programme Responsible and Inclusive Business Hub (RIBH) Southeast Asia SMEs Small and Medium-sized Enterprises
The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH supports and partners with the private sector in the field of SNV Stichting Nederlandse Vrijwilligers / Netherlands Development Organisation sustainable development and inclusive business (IB). On behalf of the German Federal Ministry for Economic Cooperation and Development SRC Sampoerna Retail Community (BMZ), GIZ established a worldwide network of Responsible and Inclusive Business Hubs (RIBHs), currently operating from Cairo, Jakarta
and Pretoria. Furthermore, the RIBHs contribute to the global CSR discussion by building networks of CSR centres of excellence to convey WBCSD World Business Council for Sustainable Development
result-based methodological skills through German development cooperation.
The RIBH in Jakarta is promoting the joint engagement of enterprises and development programmes in tackling development challenges. In
its work, it aims at developing innovative approaches that advance collaboration between the private sector and development cooperation on
responsible business practices with a strong focus on IB.
RIBH believes that for companies, CSR means making core processes sustainable and using products and business models to address social and
environmental challenges.
Sustainable Economic Development through Technical and Vocational Education and Training Programme (SED-TVET)
The programme ‘Sustainable Economic Development through Technical and Vocational Education and Training’ (SED-TVET) is a joint effort
of German development cooperation and the Indonesian Ministry of National Education (MOEC), Ministry of Manpower (MOM) and the
Ministry of Industry (MOI). It aims at improving the employability of manpower, particularly of TVET graduates and underemployed youth,
in selected regions of Indonesia. The SED-TVET module implemented by the GIZ consists of four fields of activity related to improving the
regulatory framework, innovating for private sector cooperation, promoting TVET institutes’ excellence and establishing standards and
accreditation criteria.
Private sector cooperation is a key issue in the programme. The engagement of businesses enhances the quality of TVET, brings up-to-date
knowledge into the educational system and supports demand-oriented workforce development. However, despite the urgent human resources
recruiting and development issues, many companies do not invest in education prior to hiring but resort to training later or leaving positions
unfilled.
SED-TVET believes that since many businesses look towards education in their CSR activities, investment could be more strategically adjusted
to address recruitment and local workforce development needs. This would turn the investment into a win-win situation for businesses, training
institutions and graduates alike.
44 05
From CSR to Inclusive Business From CSR to Inclusive Business VII. About the authors
APINDO - The Employer’s Association of Indonesia
The Employer’s Association of Indonesia (APINDO), established on 31 January 1952, is a national business organisation linked to the Indonesian National Chamber of Commerce (Kadin Indonesia) with a strong emphasis on labour-intensive industries.
APINDO has active chapters in 33 provinces and 222 districts in Indonesia. APINDO’s membership also includes other smaller sectoral industry associations in Indonesia with direct business links for supporting small and medium-sized enterprises (SMEs) in the manufactur-
Photo: APINDO ing and agriculture sectors. Its current national membership profile consists of around 14,000 companies.
At the national level, APINDO’s members include the large and important manufacturers and service industries, whereas at the regional level, they are mainly SMEs. APINDO, as the largest industry association in Indonesia, is regularly called upon by the Indonesian Parliament and the Indonesian Government to contribute its views on various policy priorities and the domestic reform agenda.
APINDO is also active in its participation in current CSR discussions and pays attention to CSR by collaborating with a number of partners, both national and international, in communicating the proper implementation of CSR to its members. For instance, with regard to SME development, APINDO is helping SMEs in the areas of promotion and marketing as well as the acquisition of financial resources.
APINDO states that Indonesian companies currently implement CSR in various forms, either as separate programmes unrelated to their business model or by incorporating several issues related to human rights, rights of workers or environmental issues in their CSR activities but still separate from their core business activities. Only a few Indonesian companies currently include CSR issues strategically in their business model.
APINDO believes that CSR activities that are not part of a company’s business model/core business will most likely fail. The Employers'Association of Indonesia (APINDO)
Over the past decade, we have witnessed an increase in corporate social responsibility (CSR) practices within companies in Indonesia. As a result, we in the Employers' Association of Indonesia (APINDO) have begun to classify the practices into different categories, such as charitable CSR, promotional/marketing CSR or strategic CSR. We believe that the latter will be beneficial for the businesses themselves as well as society and the environment. Going forward, we hope the trend in CSR practice in Indonesia is moving towards strategic CSR.
Amid these developments, however, we are facing the challenge that Indonesia appears to be moving in the opposite direction: the House of Representatives is currently discussing draft legislation that could make CSR mandatory for all companies and could even go so far as to stipulate what percentage of its funds a company should spend on CSR. As stated above, we in the business community believe that strategic CSR is the best way of contributing to sustainable development and we will continue to work towards ensuring this practice becomes firmly established.
06 43
From CSR to Inclusive Business From CSR to Inclusive Business (4) Is the financial, social, and environmental sustainability of the impacts a stated goal of your CSR programme? FOREWORD
(5) Are all the important partners who could help you achieve your CSR objectives sufficiently involved in the implementation?
The initiative we are taking in APINDO to make CSR practice more strategic in nature is taking several forms that include participating in IV. System instalment academic discussions and conducting in-depth research to identify best practices, which we then circulate to our members. These initiatives (1) Do you have an organizational structure in place within the company, with clear functions will hopefully move current CSR practices towards the ideal we are striving for. and responsibilities and does it also apply to the CSR programme? This study is one of the initiatives we have taken to make CSR practices in Indonesia more strategic. In cooperation with the Deutsche (2) Do you implement an adequate communication system that enables good levels of information Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, which has been supporting the private sector in the field of sustainable within your company and helps to safeguard the interests of each stakeholder? development and inclusive business, we have conducted a study of CSR practices among our member companies. We also would like to thank Indonesia Business Links (IBL) for assisting with its expertise in the field assessment of this study. In addition, we would like to (3) Do you ensure financial transparency among stakeholders and are all programmes equipped express a special thanks to the participating companies of the executed survey: PT. Adaro Indonesia, PT. Adis Dimension Footwear, PT. with adequate financial and human resources? HM Sampoerna, Tbk., PT. Pacific Place Jakarta, PT. Sinar Mas Tbk. (downstream), PT. Trimitra Baterai Prakasa, as well as PT. Unilever Indonesia, Tbk. (4) Do you implement an adequate monitoring and evaluation system to ensure periodic assess-
ments of the impact of your CSR programme against the company’s set objectives and key The study provides some insight into the current state of CSR in Indonesia and identifies opportunities and challenges for continued performance indicators? development of strategic CSR practices with a specific focus on inclusive business models. More importantly, this publication aims to raise awareness among businesses about opportunities for implementing strategic CSR by providing specific examples of best practice. (5) Do you encourage and give room for testing new ideas and innovations that might potentially
increase your positive impact and help you achieve your company’s objectives? The study also includes a self-assessment tool that any company can use to assess the current status of its CSR strategy, identify measures to make its CSR activities more strategic, and flag up potential for inclusive business models. V. Measurement and reporting
(1) Do you conduct periodic reviews of your CSR programmes?
(2) Do these reviews adhere to globally accepted standards (such as those of the Global Reporting Initiative? Hariyadi B. Sukamdani (3) Does the review of the CSR programmes impact an integral part of your company’s monitoring system? Chairman
(4) Do you consult with internal/external stakeholders to assess the full spectrum of the impact APINDO made by your business operations and CSR activities?
(5) Do you document best practices in the form of success stories and testimonials and share them with the business community and wider public?
42 07
From CSR to Inclusive Business From CSR to Inclusive Business I. Chapter 1 – ABOUT THIS STUDY Guiding questions for five success factors Instructions: Please categorize your answer into one of three options: Yes, no, or somewhere in between. Then convert that answer into a number (Yes = 1, No = 0, somewhere in between = 1/2). To get the final rating, add up the numbers for all five questions and then divide by 5 to work out the Objectives average.
This study is a result of the close cooperation between the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and The Success Factors Answer Score (1-5) Employers’ Association of Indonesia (APINDO). On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), GIZ works extensively on corporate social responsibility (CSR) and inclusive business (IB) all over the world and I. Leadership explores how such approaches can best contribute to sustainable development. (1) Is your senior management engaged in drafting the CSR strategy? In Indonesia, GIZ and APINDO have teamed up with the goal of promoting strategic CSR practices among companies based in the region. (2) Does your CSR manager (if you have one) report directly to senior management? As one of the largest and most influential business associations in Indonesia, APINDO is perfectly placed to be an agent of change for the
adoption of more strategic CSR practices in the country. It is hoped that this study marks a first step towards this goal. (3) Does your senior management lead by example/is it actively involved in the implementation of CSR activities? Based on in-depth case studies of the CSR practices of seven APINDO member companies, this study aims to:
(4) Does your senior management actively support employees in getting engaged in CSR 1. give insight into the current state of CSR in Indonesia and identify opportunities and challenges for the further development of activities? strategic CSR practices with a specific focus on IB models;
(5) Does your senior management embrace and celebrate the impacts achieved through CSR 2. raise awareness among APINDO and the broader business community in general of opportunities to implement strategic CSR, which activities as part of the company’s core business performance? at the end may lead to the discovery of IB opportunities and potential investments in education and workforce development;
II. Policy-setting 3. provide concrete examples and best practices from APINDO member companies in order to inspire and promote strategic CSR and
IB models in Indonesia. (1) Do you have coherent policies and strategies in place that lead your business activities and are also applicable for implementing CSR programmes?
Respondents (2) Are there clear links between the CSR strategy and the overall goals and key perfor- mance indicators of your company?
Companies’ selection criteria is based on their availability and willingness to participate in the study and be registered as an APINDO (3) Are the current policies guiding your CSR activities appropriate and consistent with the member. The study is intended to gain key insights into and recommendations on the strategic implementation of CSR practiced by selected company's overall business principles and vice-versa? APINDO member companies. (4) Are current policies communicated and distributed to all stakeholders?
There are seven company participants, which are categorised by the ownership criteria, meaning whether they are a national / local company (5) Do your company’s vision and mission reflect the values and impacts pursued within your (local) or a multinational company (MNC). This categorisation is based on the assumption that there is a differentiation in terms of values CSR activities? and principles in practicing CSR in the different categories, which will be analysed through the study. III. Programme development
(1) Do you engage your key stakeholders (e.g. customers, employees, stakeholders, local community and public authorities) in the development of the programme by identifying and addressing their needs?
(2) Do you take into account all business processes in your company’s value chain when designing the CSR programme, so that the programme is coherent and specifically designed to support your targets and objectives?
(3) Does your CSR strategy go beyond the activity level and does it instead strive for systemic change and progress, both within the company and the target population of the activities (if external)?
08 41
From CSR to Inclusive Business From CSR to Inclusive Business Step 3: Identify action needed to make improvements. The respondent companies (in alphabetical order):
• The final step of this exercise, Step 3, helps you to identify whether your current CSR activities can be replaced or complemented by an COMPANY NAME CATEGORY SECTOR inclusive business model. The more questions you answer with yes, the stronger your potential for transforming your CSR activities into inclusive business models. PT. Adaro Indonesia Local Mining
a. Does your value chain include low-income communities (BOP) as customers, suppliers, employees or business partners (e.g. PT. Adis Dimension Footwear Local Manufacturing distributors) and is this component of your value chain part of, or close to, your core business? PT. HM Sampoerna, Tbk. MNC Retail i. If yes: have you identified, or could you identify, opportunities for improving their livelihoods directly through your core PT. Pacific Place Jakarta Local Property business processes? PT. Sinar Mas Tbk. (downstream) Local Manufacturing ii. If no: is there a way to include more people from this group, while ensuring a positive impact? PT. Trimitra Baterai Prakasa Local Manufacturing b. Does your CSR strategy currently aim to achieve poverty alleviation for your local community? PT. Unilever Indonesia, Tbk. MNC Consumer Goods c. Are any of your CSR activities financially viable business models or could they be transformed into such?
i. If yes: is the business model scalable or replicable? ii. If yes: is the business model financially, environmentally and socially sustainable? Why corporate social responsibility is important iii. If yes: does the business model generate benefits for the community (not by exploiting them!)? for companies and sustainable development
iv. If no: are there any opportunities to engage in other CSR activities, which are closer to your core business and could also be financially viable?
• If you were able to answer yes to many of these questions, you might want to develop these ideas further so that your business and the “Corporate social responsibility is the continuing commitment by business to community can reap the mutual benefits of inclusive business models. behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the community • Should you need any further advice, we have compiled a list of pointers for further reading and useful contacts at the end of this and society at large.” publication. World Business Council for Sustainable Development (2016)
While definitions of CSR vary and evolve over time, the term usually describes responsible business conduct that considers the economic, environmental and social implications of its business. Though philanthropic activities by companies are not a new phenomenon, the concept of corporate social responsibility first emerged in the 1950s and 1960s. However, only since the turn of the century has there been increasing momentum for CSR, and companies are widely expected or even required by law to have CSR strategies in place.
The development of CSR has evolved together with the notion that business should not only be responsible but can also be a driving force in the development of societies and countries beyond purely economic considerations. This trend is clearly visible in global initiatives such as the United Nations Global Compact, whose members include many of the world’s biggest companies, and other similar clubs and formats such as the World Business Council for Sustainable Development. It is also becoming manifest in the prominent role some pioneer- ing multinational companies like Unilever are taking in the implementation of the 2030 Agenda for Sustainable Development.
40 09
From CSR to Inclusive Business From CSR to Inclusive Business CSR is a powerful catalyst for the contribution of the private sector to sustainable development. The CSR activities of companies can Spider graphic exercise improve the livelihoods of the company’s workforce, the surrounding communities or even the broader region in which the company is active. The activities can include providing access to or improving education and health care, or improving infrastructure, environmental protection and alternative income opportunities, just to name a few. Companies can thereby directly contribute to the achievement of the Leadership United Nations Sustainable Development Goals (SDGs). 5
Next to the important role CSR can play in promoting sustainable development, companies have also realised that CSR can go beyond 4 philanthropy and ‘responsibility’ and actually strengthen business performance. By implementing activities along their value chain that develop / retain the workforce or secure the stable and quality supply of relevant product components, companies can improve their own 3 financial stability and competitiveness. 2 Measurement Policy-setting & reporting 1
“ ere is a strong rationale for companies to act decisively to minimize their negative development impacts and maximize the positive ones. e bene ts include value protection and value creation, managing costs and risks and capturing opportunities.”
(Jane Nelson (2015): Business and the Sustainable Development Goals: Building Blocks for Success at Scale)
System Program installment development Strategic corporate social responsibility and inclusive business NOTES:
Despite its potential benefits for companies and society, CSR is often regarded as the purely philanthropic activities of a company that are detached from its core business operations. Companies may thus find themselves facing competing demands: while the public increasingly expects that CSR is credibly demonstrated, the company is also required by shareholders to maximise profits. When devising and implement- ing CSR activities, companies thus have to balance what is often seen as conflicting priorities.
At the same time, CSR projects have been widely criticised from a different angle for their reliance on annually reviewed CSR budgets and the resulting uncertainty of their sustainability and impact. According to such criticism, a lack of a business mindset or long-term financing plans or business models in many CSR activities gives rise to the typical problems of the lacking sustainability of philanthropic work. This funding insecurity is further amplified by the fact that CSR budgets are commonly one of the first areas to be cut if the companies face financial difficulties.
10 39
From CSR to Inclusive Business From CSR to Inclusive Business Step 2: Draw a spider graph CSR activities of companies have also received criticism for the lack of strategic approaches to programming and of scalability1. The activities often shift with changes in management and may reflect the current management’s preferences rather than build on the needs, • First, transfer your own rating from the exercise in Step 1 to the spider graph below, marking the scores you would give yourself for each identity and strong points of a company and its targeted beneficiaries. of the five dimensions. Yet things are changing. All over the world companies are addressing these shortcomings by taking a more strategic approach to CSR that • Second, take a moment to think about the dimensions in which you rate your performance as very high. What elements, people, activities creates greater impact for society and greater value for the companies themselves. or other factors make this success possible and how does it impact your business?
• Finally, assess those dimensions where there is room for improvement and try to draft some ideas about how they could be improved (see also Step 3). CSR 2.0
Example of a spider graph An increasing number of companies are taking a more strategic approach to CSR. Often referred to as strategic CSR or CSR 2.0, this approach seeks to build on the core business of a company to devise activities that benefit communities and the business alike.
Leadership According to a widely cited concept by Wayne Visser2, CSR 2.0 needs to build on five principles: creativity; scalability; responsiveness (to 5 the given situation of the company / product or stakeholder group); glocality (the adaptation of international concepts to local particulari- ties); and circularity (the ability to regenerate resources throughout the process). These five principles set high demands for CSR but thereby 4 also ensure that it can sustainable and innovative and contribute to sustainable development. Above all, Visser’s vision of CSR 2.0 demands that companies are critical and thorough in their CSR work. 3
2 Measurement Policy-setting & reporting “Business creativity needs to be redirected to solving the world’s social and 1 environmental problems.”
Visser, 2011
Scalability is an especially important aspect that has become crucial in development interventions. Visser demands that companies question not only their business models but also how their current operations may or maybe not be contributing to the achievement of stated goals and whether these goals are actually harmonised. In the long run, Visser envisions CSR 2.0 as going even further than the strategic level, System Program taking a systemic approach that addresses inequalities and injustice on a global level, and being driven by regulation and consumer demand. installment development
Existing CSR Profile
1 For a comprehensive summary of the critique of ‘traditional CSR’, see Visser, Wayne (2011). CSR 2.0: Transforming the Role of Business in Society. Lien Centre for Social Innovation. 2 Visser, Wayne (2011). CSR 2.0: Transforming the Role of Business in Society. Lien Centre for Social Innovation.
38 11
From CSR to Inclusive Business From CSR to Inclusive Business Inclusive business VI. Chapter 6 – CSR Assessment Tool Simple steps to review your own CSR strategy G20 Inclusive Business Framework Inclusive businesses provide goods, services, and livelihoods on a commercially viable basis, either at scale or scalable, to Goals of the assessment tool people living at the bottom of the [economic]pyramid (BOP), making them part of the value chain of companies’ core This assessment tool uses three simple steps to identify strategic CSR potential within your business operations. Specifically, it helps you to: business as suppliers, distributors, retailers, or customers. In addition to these commercially inclusive activities, businesses 1. review the main success factors for CSR in your company (status quo); may also pursue broader socially inclusive goals. Inclusive business should promote sustainable development in all its 2. identify measures to make your CSR activities more strategic (in the future); dimensions: economic, social and environmental.
3. identify potential for inclusive business models.
Among the practices companies employ to make their CSR activities more strategic is IB. Three simple steps IB is a strategic business practice that creates added value for companies through the involvement of the lower income groups of the population pyramid (bottom of the pyramid (BOP)) into the company’s value chain as suppliers, employees, distributors or consumers. IB Step Step Step models are mutually beneficial, meaning that both the businesses and lower income population benefit from the business relationship. 01 02 03 One of the great strengths of IBs is that they are usually not dependent on philanthropic contributions but are rather, once up and running, Analyse the Identify action Draw a spider graph commercially viable through their own revenue streams or cross-financing models. current status of your needed to make CSR improvements IBs create positive impact for low-income communities3 in various ways, which include:
1. empowering marginalised communities;
2. increasing household incomes; How would you rate your own Where do your company’s strengths Identify whether your current CSR
3. raising productivity; performance with regards to the lie in terms of strategic CSR? What measures can be replaced or
4. addressing basic needs, such as water, electricity, etc. success factors for strategic CSR as are the factors in your success? complemented by an inclusive
IB models have been developed in many different sectors, such as agriculture, tourism, ICT, health care or education4. In Indonesia, there described earlier in this study? Which of them could you improve business model? is great potential for companies to put IB models into place, as the amount of population that can be considered as BOP is substantial. and which would you like to According to a study by the Asian Development Bank (ADB) and the Netherlands Development Organisation (SNV)5, about 119 million improve? people in Indonesia (49% of the population) live on less than USD 2 per day. This means that there is not only a large market in the BOP, but also a large workforce.
Step-by-step assessment guide
Step 1: Analyse the current status of your CSR strategy
• Background reading: Chapter 3 - Success factors
• Use the table in Guiding questions for five success factors to draw up a profile of your existing CSR strategy and its relative performance by answering the questions in the table and then, based on those answers, rate yourself on a scale of 1 (lowest level for 3 UNDP (2008). Creating Value for All: Strategies for Doing Business with Poor. that indicator) to 5 (highest level for that indicator). 4 For a list of sectoral guides to IB models authored by GIZ, visit https://www.giz.de/Wirtschaft/de/html/1745.html. 5 ADB and SNV (2013). Developing the Business Case for Investing in Inclusive Business in Indonesia – A Market Scoping Study.
12 37
From CSR to Inclusive Business From CSR to Inclusive Business Lastly, this study proposes seven recommendations for APINDO member companies as well as other companies in Indonesia to make their CSR more strategic: Methodology
The study is based on a combination of desk study, semi-structured interviews and mapping.
1. Participate in regular exchange formats with other APINDO member companies to discuss best practices and challenges in The company interviews and analysis were guided by the Corporate Citizenship System & Process Management Framework by the Philippine CSR and identify synergies between companies. Business for Social Progress (PBSP) Corporate Citizenship Center6. This tool was designed by the PBSP to assist companies in developing and implementing effective CSR programmes based on five essential elements: leadership, policy-setting, programme development, systems installation 2. Promote ownership of CSR activities by employees and management through better information materials, site visits and and measurement and reporting. For the purpose of this study, the framework was simplified to examine how the surveyed companies’ CSR events. programmes perform in these respective five elements.
3. Consider investing in Human Resource Development as part of their strategic CSR policy and combine internal Human Resource Development with outreach and training programmes for the community (ideally as formal education programmes ent • instead of short-term informal trainings). estm Env Inv iro al n ci Develop m o am me en 4. View CSR as a long-term activity and develop a vision for CSR programming that builds on longer timeframes to create more S gr nt t • ro a l sustainable programmes. n P S r S t e y e c s w g t n n e a o i m 5. Take a value-chain approach to CSR by analysing potentials for CSR activities along the whole value chain of the company. t r t d C
e I s
n e S h
s
c i
y
p t
a
a c
l
i
6. Identify and develop IB potentials in value chains and document findings to work as champions to inspire other companies. Leadership
l
l
•
l p
a
o
k C t
P
r i
o
o
o
n
r
7. Align CSR activities with SDGs to facilitate the evaluation and tracking of shared impact on a global scale. p
W
g o
g
n
r
i
M
t
n a
i r
t
e
o g
e a
p
s
a
-
e
u
r C
8. Create in-depth case studies of best practices as learning materials and liaise with business schools to promote the topic in R n
e Figure 1. Corporate Citizenship System & m
d n e a a n
t
o
m
M
academia. Process Management Framework m
•
u
p
i
n
h
i t s y r
e by the Philippine Business for P
n a t r Social Progress (PBSP) Corporate Citizenship Center
First, a comprehensive review of standard literature on CSR, IB and related topics in Indonesia was conducted, including the regulatory framework, to give an overview of the status quo. This desk review was complimented by qualitative findings from the company surveys in terms of the drivers of their CSR activities. Consequently, the CSR activities of the participating companies were categorised and mapped along an activity spectrum to get an overview of the different approaches evident in CSR activities in which APINDO member companies are engaged. The activities were then examined with regard to the five success factors for strategic CSR adopted from the PBSP framework. In a third step, the IB activities were examined in detail to determine the opportunities and challenges facing participating companies in IB activities.
6 Philippine Business for Social Progress (PBSP) Corporate Citizenship Center (2002): Corporate Citizenship System & Process Management Framework.
36 13
From CSR to Inclusive Business From CSR to Inclusive Business II. Chapter 2 – DRIVERS OF CORPORATE V. Chapter 5 – CONCLUSION SOCIAL RESPONSIBILITY IN INDONESIA AND RECOMMENDATIONS
(1) There is still a perception among the business community as well as regulators in Indonesia that CSR is only related to social motives. This chapter aims to provide an overview of some of the drivers of CSR in Indonesia. The philanthropic practices of companies all over The goal of the majority of CSR programmes being implemented by respondent companies is to empower their social stakeholders. In the archipelago are very different, partly due to the religious and cultural diversity in Indonesia. This diversity makes it difficult to achieve implementation, the majority of companies use an approach that does not consider the long-term sustainability of activities, both from comparability between different companies to get a better idea of the state of CSR in Indonesia. Nevertheless three drivers considered the private sector’s side (e.g. implementing CSR activities as part of the company’s ‘social cost’, burden or obligation rather than as an important by the authors are listed below, though they are by no means exhaustive. investment) and from the side of the community targeted by the CSR (e.g. short-term project with low impact).
(2) From this study, there is a potential for Indonesian companies to make their CSR activities more strategic, incorporate sustainability and Tradition and cultural expectation also create mutual benefits for the companies as well as beneficiaries. Using the inclusivity principle in the supply chains of companies as part of their CSR activities is one way of implementing strategic CSR. This practice, which is called IB, is believed to, as demonstrated in this study, increase the effectiveness of the private sector’s role in fostering development in Indonesia.
(3) The success of shifting companies’ CSR activities from philanthropic or charitable to strategic is determined by the leadership of “Corporate social responsibility is the continuing commitment by business to behave companies and their management. Their strong commitments to IB should be clearly communicated to company stakeholders and ethically and contribute to economic development while improving the quality of life of translated by their staff into real action, including the development of systems and mechanisms to manage it. To motivate business the workforce and their families as well as of the local community and society at large.” leaders to develop IB models, strong evidence should be presented that shows the social benefits, such as obtaining the social license to operate, and the economic benefits, including maximising profits and/or minimising risks (e.g. strengthening value chains, expanding World Business Council for Sustainable Development the labour pool, or developing new markets).
(4) IB activities could be practiced by any kind of company in Indonesia, regardless of their size (small, medium or large), type of industry (garment, consumer goods, manufacturing, mining, etc.) and ownership (national, multinational, family-owned or state-owned), as long Much of the CSR activity undertaken in Indonesia is motivated by the notion of ‘giving something back to the community’. Traditionally, as they can map the opportunities to include the BOP or vulnerable and poor people into their supply and/or value chains, adapt their companies help people in the form of donations given at national celebrations and religious events, as well as in the aftermath of natural business process to allow the BOP to take part in supply or value chains, and leverage the strengths of the BOP to ensure they meet the disasters to repair and develop public and social facilities. Therefore, up to now, companies often still understand CSR activities as a compa- standards required by the Industry. ny’s moral obligation to the community. (5) Another success factor in practicing IB is understanding the challenges to come (such as information gaps, limited skills and knowledge, lack of access to financial capital, lack of infrastructure facilities and ineffective regulatory frameworks) and knowing how to mitigate those challenges. To overcome the challenges, the company can collaborate with other businesses (or business associations) or Regulation sometimes with non-traditional partners, such as non-governmental organisations (NGOs) and public service providers. Through such collaborations, companies can gain access to complementary capabilities and pools of resources to overcome those challenges. At the same time, government regulation has become a central driver for the adoption and implementation of CSR activities in recent years. According to Law No. 40/2007 on Limited Company, whose activities are related to natural resources, these companies are required to demonstrate social and environmental responsibility. Most of them comply with this requirement by spending around 3% of the companies’ annual profit on CSR activities. With the enactment of this law, Indonesia was the first country to introduce mandatory social responsibility legislation.
14 35
From CSR to Inclusive Business From CSR to Inclusive Business Inclusive business potential
Law No. 40/2007 on Limited Company The analysis in the previous chapter shows that IB activities have been carried out by companies participating in this study. Each corpora- tion, aware or unaware, has conducted IB to a certain degree in their operation. Chapter V
The core problem among companies is the comprehension of IB in itself. Some companies are unaware that some of their activities are Social and Environmental Responsibility indeed IB practices, for example, the water batch supply programme launched by one of the respondent companies. At first the programme Article 74 was viewed as a regular business programme. The company initially did not realise that the programme has social impacts. (1) Companies operating on and/or related to natural resources are obligated to carry out Social and Environmental Responsibilities.
In general, the activities carried out by the companies are still philanthropic or charity-based without consideration of financial gains or (2) Social and Environmental Responsibilities as prescribed in Section (1) refers to the obligation of the corporation as budgeted and benefit. This is essentially in line with one of the missions/goals adopted by the companies: participating in improving the welfare of the calculated as borne by the corporation and implemented through decency and properness considerations. community. (3) Corporations that deny the obligation as prescribed in Section (1) are liable to sanction in accordance to the law.
(4) Further conditions on Social and Environmental Responsibilities are stipulated through Government Regulation.
Today, there are at least seven national laws and local regulations related to CSR that are both regulatory and redistributive in nature. The government strives to encourage companies to actively participate in social activities with the issuance of these regulations. While this is a great achievement in terms of creating awareness on CSR, the regulatory approach of Indonesia also has its drawbacks.
However, these rules create confusion among implementers in the field. Differences in understanding CSR have led to the varying implementation of CSR in each region, as well as the development of local regulations that vary regarding CSR. This lack of clarity in regulations has become an obstacle for the companies to carry out CSR programmes. Companies operating in the regions must seek approval from the local government to carry out CSR activities by holding annual meetings with governmental agencies. As a result, many companies conduct CSR activities just to meet current regulations, but they do not risk being innovative in their programming. Such a mandatory approach to CSR is input-focused (amount of investment) rather than focusing on the outputs and impact of CSR programmes to evaluate if they comply with regulation.
Nevertheless, the publication of these regulations translates into increasing awareness and understanding of the importance of CSR among relevant stakeholders.
34 15
From CSR to Inclusive Business From CSR to Inclusive Business International corporate social responsibility guidelines Opportunities
The study revealed that there are a number of benefits derived from the implementation of IB, namely: A number of global standards also bear relevance for Indonesia and can drive the adoption and improvement of CSR activities in the country. One of the most influential standards was devised by the International Organization for Standardization (ISO), which published 1. Companies can reduce procurement costs of goods and raw materials, both in terms of efficiency and continuity. An example is PT. ISO 26000 in 2010 as a guide for organisations or companies to operate in a socially responsible manner. Trimitra Baterai Prakasa and its water bath supply programme. Companies do not just get a cheaper price; they are also assured of the quality and continuous supply of the necessary equipment every month.
2. Workforce issues, particularly the inability to find qualified employees, are a problem that most companies faced. Companies that provide Holistic approach training to the underprivileged, particularly the local population, can produce employees with improved skills and productivity as well as a high level of company loyalty. This is proven by the opening of training centres by PT. Adis Dimension Footwear to train locals in 6.8” Community sewing and shoe-making. This allows PT. Adis Dimension Footwear to solve workforce problems and attract employees with the involvement 6.3” required skills and a high level of company loyalty, thus increasing productivity. and Human right” development 3. Supply chain/security of supply can be an obstacle for companies especially relating to agricultural products. Community participation in the supply chain can be a solution to this problem. A successful example is PT. Unilever Indonesia, Tbk. with its empowerment of black soybean farmers on the island of Java. 6.2” Organizational
6.7” 6.4” Consumer ORGANIZATION Labour Challenges issues practices
The problems faced in launching an inclusive activity posed a challenge to the companies. These problems include: governance 1. Lack of adequate skills and knowledge in the BOP. This makes it challeng- 6.5” 6.6” ing for companies to include the low-income population in the company’s “We are helping our business partners Fair operating The value chain. environment improve their capabilities.” practices 2. The information gap and the lack of understanding in the company of IB. Companies report that they are not able to implement IB because they Sancoyo Antarikso, External Relations Director Interdependence usually do not deal directly with disadvantaged communities. & Corporate Secretary, PT. Unilever Indonesia Tbk and Board of Founders of Indonesia’s 3. Lack of a regulatory framework. The lack of clear regulations regarding Global Compact Network the implementation of CSR becomes an obstacle for companies to innovate IB strategies. Companies operating mainly around natural Figure 2. ISO 26000 Core Subjects resources, for example, require guidance as to which CSR activities are approved or not approved, so that they are able to annually budget for such activities due to the large amount of resources needed for CSR, both material and immaterial. 1) Organizational Governance: This core subject refers to how your business makes and implements strategic decisions; 2) Human Rights: This core subject is based on the Universal Declaration of Human Rights (adopted by the UN General Assembly in 1948); 4. Limited access to finance. Because IB is still considered as a social activity or as activities with hard-to-measure risks by financial institutions 3) Labor Practices: For this core subject, the ISO 26000 refers to the ILO (International Labor Organization), the international governing body in Indonesia, and because people are still deemed ‘not bankable’, financial institutions disburse loans less freely unless companies are able for labor practices; to substantiate the loans with assets and reputation as collateral. For this reason, PT. Adis Dimension Footwear allocated its own money 4) The Environment: The environmental principles of this core subject are: Environmental responsibility; The precautionary approach; for the start-up capital of its cooperatives. Environmental risk management; and The polluter pays;
5) Fair Operating Practices: This core subject focuses on the ethical conduct in a business’s dealing with its stakeholders; 5. Lack of infrastructure facilities. Farmers usually live in rural areas that have limited road and transportation access. This results in high 6) Consumer Issues: This core subject deals with your business’s responsibility for minimizing risks in the use of your service or product; transport costs, thus reducing their competitiveness. 7) Community Involvement and Development: The ISO 26000 states that “Community involvement and community development are both integral parts of sustainable development”.
(http://www.sustainability4success.com/iso-26000-II.html)
16 33
From CSR to Inclusive Business From CSR to Inclusive Business Activity: Koperasi Adis The ISO 26000 standard mainly provides guidance on the principles of CSR practices and the contribution of companies to sustainable Target object: Employees development. Due to the vast global differences in company culture and ethics, ISO does not, however, provide certification for the 26000 Company name: PT. Adis Dimension Footwear standard. There are seven core subjects covered by ISO 26000, which are: organisational governance, human rights, labour practice, Activity description: environment, fair operating practices, consumer issues, and community involvement & development.
Workers often times need extra funds to meet personal needs, such as children’s tuition and The standard thus promotes CSR activities which are not only aiming at community development or creating broader value for society, but
other expenses. It is clear that the company will not be able to meet all its workers’ needs, also internal aspects of the company and the way it runs its operations.
especially due to its large workforce. To respond to this issue, the company provided initial Another set of guidelines commonly used in the corporate sector with a particular focus on CSR reporting and sustainability practices is the Sustainability Reporting Guidelines published by the Global Reporting Initiative. The fourth generation of these Sustainability Reporting capital and formed a cooperative body that functions as a savings and loan facility for the Guidelines was released in May 2013.7 workers. It is also meant to improve the welfare of the workers. The cooperative also performs Photo: PT. Adis Dimension Footwear Photo: PT. Another influential voice in the CSR space is the United Nations Global Compact and its Global Compact Principles, which sets 10 basic functions other than the designated savings and loan function, such as Adis Mart, an outlet where members can shop using an principles for companies on doing CSR, including elements relating to human rights, labour, environment and anti-corruption. United integrated card system. The Adis Mart also offers courier and online payment services, which enables employees to pay their utility Nations Global Compact chapters exist in many countries worldwide. The Global Compact chapter in Indonesia counts 117 signatories. The OECD Guidelines on Responsible Business Conduct also serves as a framework reference, though MNEs generally have more elaborate bills, e.g. for electricity, and uses a state-of-the-art IT system. The system was developed internally based on open-source models and CSR programmes in place already. enables workers to further increase the quality of their work. Presently, Adis Mart is operating on IDR 5 billion of revenue per month.
Because of the success of its cooperative model, the company regularly receives visits from various third parties (companies, government, cooperatives, universities and international visitors) for peer-to-peer learning and knowledge exchange.
7 Further information on the Global Reporting Initiative and a range of useful tools for interested companies can be found at https://www.- globalreporting.org.
32 17
From CSR to Inclusive Business From CSR to Inclusive Business Activity: Providing Space for Food Vendors III. Chapter 3 – Analysis of the sample: Target object: Food vendors Company name: PT. Adis Dimension Footwear General findings Activity description:
One of the problems the company faces is a logistical matter, namely providing lunch for its thousands of workers. Allowing workers This chapter presents an overview of the CSR activities of the surveyed companies and describes the factors relevant to the success of their to leave the premises to find meals would create a bigger problem: there is no guarantee the food is hygienic and it may compromise CSR programmes. worker attendance as their work time could be reduced through lateness or food-borne illness. To respond to this issue, the company Activity spectrum launched a programme by providing space in the peripheral area of the company for food hawkers to sell their goods. The company provides training in food handling, food safety and waste management.
The seven companies surveyed for this study have a total of 63 CSR activities in place. These activities are of a very different nature, from As a result, there is currently a waiting list of workplace improvement measures to education opportunities for employees or income opportunities for surrounding communities. Rather hawkers waiting to open their stations in this than mapping the activities by sector or the relevant target groups, the study examined how they relate to the core business of the company and how the companies value these activities and understand their role in facilitating them. area because it is much more profitable and
safe. The company also benefits from a The CSR activities were plotted along the ‘continuum of social investment’ adapted from the European Venture Philanthropy Association (EVPA). Figure 3 below illustrates the spectrum of motivation of CSR activities, from purely philanthropic to purely commercial. This greater degree of discipline and a controlled exercise sheds light on the motivation of the participating companies in operating their CSR programmes and helps identify IB practices quality of food available to its workers. and potentials within the 63 activities. Photo: PT. Adis Dimension Footwear Photo: PT.
Purely Philanthropic Purely Commercial Activity: Rubber Farmer Empowerment Target object: Rubber Farmer Philanthropy / Charity Social Driven Socially Responsible Traditional Business Company name: PT. Adaro Indonesia Non-financial mission Social mission with min. Market driven with social Profit driven Activity description: financial return and / or environmental Mining companies are obligated to conduct reclamations of post-mining areas. Reclamation objectives Impact only Impact first Finance first is a part of the core business operations for a responsible mining company.
PT. Adaro Indonesia realises that in the near future the exploited mining fields will have to Inclusive Business be reforested. One commodity that would be suitable for the area is the rubber plant. In line
Photo: PT. AdaroPhoto: PT. Indonesia with the mission of the company to develop the community’s economy, the company 44 14 5 activities launched a programme for rubber farming. The company provides training and education on strategic rubber farming for optimal yield. The result is that 700 hectares of fallow land have now been reclaimed for rubber farming, involving 7,500 heads of household.
Combining a business operation (reclamation of a post-mining area) with the company’s mission to develop the economy of the
surrounding community is another example of an IB approach. Figure 3. CSR activity spectrum of the surveyed companies, adapted from the European Venture Philanthropy Association’s continuum of social investment
18 31
From CSR to Inclusive Business From CSR to Inclusive Business Activity: Water Bath Supply Out of the 63 activities recorded during the interviews, 44 are considered purely philanthropically motivated, whereas 19 activities are Target object: Neighbouring local community considered more market-driven and as IBs or activities with IB potential. The IB activities will be discussed in more depth in the following Company name: PT. Trimitra Baterai Prakasa chapter. Activity description: All of the companies surveyed for this study carry out CSR activities and understand the basic concept of CSR. Many of the activities
The company needs a monthly replacement for water bath containers in the factory. The baths are made from fibreglass material that undertaken are considered donations by management that are necessary to gain public legitimacy or comply with existing regulations.
can be moulded easily. The company noticed that there were individuals with skills in melding fibreglass in the surrounding neighbourhood. Becoming more strategic
The company provided the specifications and supervision in the production process. The practice of CSR in some companies has shifted from a means to improve corporate image to activities that are more strategic and Along with the process, the company educated more people and established coopera- impact-focused. Often, these new activity fields are more closely related to the company‘s core business. These changes have often been tion through the karang taruna (youth local organisation). The monthly turnover for accompanied by the realisation that CSR is not just an answer to society’s demands for business accountability, but that CSR activities can the water bath supply is between IDR 200 – 400 million. also benefit the company commercially.
Advantages for the company: During the interviews, companies raised a number of benefits of CSR programmes, such as workforce development and retainment or supply chain reliability that make the business case for CSR. Below are a number of examples of such strategic CSR activities, clustered into
• reliable supply as PT. Trimitra Baterai Prakasa also monitors the production; Baterai Prakasa Trimitra Photo: PT. Quality assurance training for the community in two thematic sections. • cost savings through the low cost of transport. the Cilincing area in water bath production
“We cannot run a good business if the surrounding community is poor and marginalised.” Activity: Soybean Farmer Empowerment Sancoyo Antarikso, External Relations Director & Corporate Secretary, PT. Unilever Indonesia Tbk and Board of Target object: Soybean farmers Founders of Indonesia’s Global Compact Network Company name: PT. Unilever Indonesia, Tbk. Activity description:
In order to obtain a sustainable supply and high quality black soybeans, PT.
Unilever Indonesia, Tbk. collaborated with Gadjah Mada University (UGM) in Making use of company strengths 2000 to engage farmers in planting black soybeans. Black soybeans are less
commonly grown than the yellow variety. After thorough research, the malika Companies can make their CSR more strategic by building on the strengths and comparative advantages of the company and its core
Photo: PT. Unilever Indonesia, Tbk. Photo: PT. soybean variety was introduced to farmers in collaboration with UGM. The business activities. distribution of seed was free, and PT. Unilever Indonesia, Tbk. provided training, consultation and supervision to farmers. As a One interesting example from the surveyed companies is PT. Pacific Place Jakarta. The company realised that in reaching its CRS goal of result, soybean farmers were able to increase their production from 1.5 tonnes/ha to 1.9 tonnes/ha, which resulted in additional supporting SMEs in Indonesia, it can make use of its sales structures by utilising unused mall space to give exposure to promising projects
income for farmers. Farmers also received market guarantees from PT. Unilever Indonesia, Tbk. to buy the black soybeans. In from SMEs by organising a one-month exhibition.
addition, the farmers also gained knowledge and skills in sustainable agriculture practices. The programme covered more than 50
kabupaten in Java and has trained more than 9,000 farmers, including 2,000 women.
30 19
From CSR to Inclusive Business From CSR to Inclusive Business Activity: Gerai untuk UKM Target object: Small and medium-sized enterprises Company name: PT. Pacific Place Jakarta Activity description:
One of the company’s missions is to empower SMEs. The company cooperates with two
selected NGOs, Dompet Dhuafa and Citra Tenun Indonesia, to exhibit and market SME
products that meet the specifications for the middle-high economy market. The selection of
NGOs is done to ensure that the products marketed correspond to the desired quality of the
company. The exhibition lasted for one month at the Pacific Place mall. The location used is Photo: PT. Pacific Place Jakarta Place Jakarta Pacific Photo: PT. an area that has not previously had a tenant.
The benefit for SMEs is very clear as their products gained exposure in the middle-high market that is often difficult to access. For
PT. Pacific Place Jakarta, the initiative not only improved corporate image but made use of the empty rental space that would have
been unutilised. Moreover, the initiative made the mall’s range for customers more diverse and innovative.
Another example is PT. Unilever Indonesia, which focused a CSR activity on enhancing one of its most important sales channels, traditional markets.
Activity: Pasar Sehat Berdaya Target object: Vendors in traditional markets Company name: PT. Unilever Indonesia, Tbk. Activity description:
As part of the company’s commitment to improving the health and welfare standards of the community, the company initiated the
programme Pasar Sehat Berdaya, which focus on the development of traditional markets in 2010. The objective of this programme is
to promote traditional markets that are healthy, clean and hygienic through self-reliant marketplace communities by advocating Pola
Hidup Bersih dan Sehat (PHBS - Clean and Healthy Lifestyle) to transform the behaviour of merchants, management and customers
of the market.
By 2015, the company facilitated 35 traditional markets in the cities of Medan, Jakarta, Bekasi, Yogyakarta, Nganjuk, Gresik, Sidoarjo,
Probolinggo, Makassar and Denpasar. The programme also promoted a PHBS education programme and provided business
managerial training to 13,684 market traders facilitated by 2,280 market traders who were trained as programme champions through
a training-of-trainers model.
Despite the obvious benefits for the community, the company was also interested in maintaining its competitive edge in the traditional
market, as 19% of sales are made through the traditional market.
20
From CSR to Inclusive Business Several companies can use their available resources to conduct several assessment programmes in their project to measure the impact of Sampoerna also has targeted CSR activities in its sales channels: their activities. The kind of report a company may produce depends on their needs and CSR accomplishments. However, emerging trends Activity: Sampoerna Retail Community in corporate reporting require a triple-bottom-line approach, which includes consideration of the economic, social and environmental Target object: Retailer aspects of business operation. Regular reporting to management is available in all companies to monitor the progress of the programme. Company name: PT. HM Sampoerna, Tbk. Activity description: In addition, several companies already produced a sustainability report as part of their obligation to disseminate information to broader stakeholders. However, a simple and brief in-house annual report of CSR activities appears to be effective in communicating the company’s Sampoerna Retail Community (SRC) is a partnership programme aimed at potential retail outlets which have been selected as business activities as shown by one of the respondents. partners for PT. HM Sampoerna, Tbk. SRC is one of the company’s flagship programmes to engage in business partnerships with
the community and aims to combine promotional activities with the distribution of its products. Here the company is aiming to
strengthen their business partners’ capacity through various capacity-building activities to increase their business skills, such as
providing retail marketing consultations as well as organising financial literacy education courses in collaboration with the company’s
banking partners. To support their retailers on the marketing side, the company assists them in changing their current traditional
outlets into semi-modern retail outlets by providing a set-up including branded table sets and chairs to transform a specific space in
the outlet into an entertainment corner to attract more customers and increase time spent at the outlet. To encourage their customers
to spend more time in the outlet, the owners usually add simple entertainment means such as a TV or chess sets.
Developing the workforce
Another step in achieving more strategic CSR consists of investing in the company’s workforce. PT. Adaro Indonesia, for example, has called into life a workforce development programme that recruits and trains mechanics for the company.
Activity: SIS Training Programme Target object: Community Company name: PT. Adaro Indonesia Activity description:
In order to ensure a consistent supply of trained and skilled workers and to involve the local labour market, the company collaborated
with one of its subsidiary companies to launch a training programme entitled Operator Preparation and Mechanics Preparation
Programme. This programme aims to improve community welfare by providing education opportunities that are tailored to the
companies’ skill needs. The programme began in 2008 and has trained and recruited more than 2,000 operators and mechanics from
the peripheral area of the mining site. Each year, more than 200 individuals graduate from the programme and are recruited into
employment with the company. The training period ranges from 6 months to 12 months, consisting of both theoretical study and
on-the-job training.
While this activity provides opportunities for local communities to gain valuable
education and skills for the labour market, it also helps the company to secure a labour
supply with the adequate skill sets. Photo: PT. AdaroPhoto: PT. Indonesia
28 21
From CSR to Inclusive Business From CSR to Inclusive Business A similar programme that focuses on training the local workforce in remote areas was called into life by PT. Sinar Mas Tbk. Some companies also expressed that the activities still feel ‘ad-hoc’ and do not have clear guidelines. To address this, the company may wish to conduct consultation sessions with involved stakeholders (employees or the community, for example), or leaders of the community to Activity: Scholarship identify strategic issues that can form the basis of the CSR agenda. Target object: Community Company name: PT. Sinar Mas Tbk. – Downstream Companies have in general installed good systems to provide information on its programmes and projects (such as newsletters and other Activity description: media), communicate CSR initiatives to internal and external stakeholders, and hold interactive sessions to disseminate information as well as gather feedback. Companies with a large workforce, such as manufacturing companies, inform their workers through bulletin boards, Companies in the pioneer operation of the factory in remote areas found it difficult to attract local employees who have higher levels which proves so far to be effective. One example of this is PT. Adis Dimension Footwear, which produces internal employee bulletins of education. The company brought employees from outside the area, but this resulted in a high turnover rate among experienced informing everyone in the company in detail on their CSR activities.
employees. To solve this problem, the company works closely with a local university by giving scholarships to students based on a
certain arrangement. After graduation, the students are mandated to work for the company for a certain period of time. Now, for 5. Measurement and reporting
facilities in Tarjun, Kalimantan, more than 75% of employees are locals with a greater level of company loyalty, and the rate of Finally, adequate monitoring and evaluation is essential to assess and further develop successful CSR programmes and make them even more turnover has decreased sharply, resulting in lower cost. strategic in the future by correcting prior shortcomings or erroneous assumptions. This involves:
1. Providing an objective assessment of the programme or initiative that is implemented; Another example is the Center for Occupational Training (COT) programme of PT. Adis Dimension Footwear that offers training that is 2. Providing an overview of the impact resulting from the programme, showing that transactions are carried out both for the nationally recognised and certified, thereby providing local people with opportunities and training that are valuable even beyond the compa- company and the stakeholders involved or affected. ny’s labour needs. 3. The result representing a key component for the development of the next programme because it provides the necessary inputs for the improvement and development of the next programme. Activity: Center for Occupational Training Target object: Community 4. Increasing public and stakeholder awareness, thus triggering an understanding among the stakeholders. Company name: PT. Adis Dimension Footwear Activity description: With regard to programme evaluation and monitoring, most of the companies are able to track down their performance by conducting monitoring and evaluation exercises such as: Recognising the lack of trained and skilled labour in the footwear industry, the company responded by launching the Center for • periodic review of programmes; Occupational Training (COT) programme. This one-month competence-based training provides basic and comprehensive knowledge • consultation with internal/external stakeholders through different kinds of surveys or modes; and on shoe-making techniques, including cutting, preparation and assembly. The training programme has been free-of-charge since • documenting best practices through success stories and testimonials. 2008, and participants who manage to finish the programme are given national certification. The companies view this as particularly vital to monitor CSR activities and ensure that the programmes achieve the target in a timely manner The company does not obligate participants to work for the company. However, should they decide to apply for employment, and within the budget so that the companies are able to report on both regularly to management and related stakeholders and improve the programmes. they are given priority. The result is that the company finds it easier to recruit skilled workers that are up to their standards so that Some companies in this study, such as PT. Unilever Indonesia, Tbk. and PT. Adaro Indonesia, have created sustainability reports that appear internal on-the-job training is no longer required. at regular intervals and report in ways that are comparable over time and allow for the tracking of progress. Another example carried out by the company is newsletter production. PT. Adis Dimension Footwear created a magazine-like newsletter describing its numerous CSR activities throughout the year, which is published periodically. PT. Adis Dimension Footwear said that this magazine is very effective for conveying information about the company and engaging stakeholders, such as the government.
22 27
From CSR to Inclusive Business From CSR to Inclusive Business Some of the surveyed companies place the CSR function within the human resources department or in the external relation division. This Activity: Workers with Disabilities demonstrates that many CSR activities or initiatives are related to managing workplace concerns. This is the case with PT. Adaro Indonesia Company name: PT. Trimitra Baterai Prakasa (Mandatory Basic Training for HSE), PT. Adis Dimension Footwear (school programme and scholarships) and PT. HM Sampoerna (Unlimit Activity description: Yourself Employee Program). In other cases, companies collaborate with development organisations, foundations or universities, or hire As one of the company’s efforts to provide equal employment opportunities for people with professional development implementers or experts to implement projects (e.g. community development projects). One example of such practice is the case of PT. HM Sampoerna establishing partnerships with NGOs/foundations to increase their administrative skills and disabilities, especially for the deaf and mute community, the company is working with an organisational capabilities and to upgrade them to be eligible partners according to the internal company standards. Another example is orphanage foundation. The project is being implemented under the supervision of the conducted by Unilever Indonesia on engaging experts from reputable universities to assist farmers (such as soybean farmers) in increasing their production. Social Department since 2007 and has been supported by the Jakarta local authorities. At the Photo: PT. Trimitra Baterai Prakasa Trimitra Photo: PT. Disabled employees in the production area beginning, the project was based on charitable motives. However, with time, the company 4. System instalment wanted to increase their contribution to creating jobs for disabled persons. PT. Trimitra Baterai Prakasa provides the same employment conditions to their deaf and mute employees as their other employees, which means full-time employment and equal employment
To ensure that implementation can proceed smoothly, some systems and components must be put in place. These components include: rights and expectations. However, due to safety reasons, employees with disabilities are provided with different coloured uniforms
and are usually placed at working stations with minimum working risks. At the moment there are more than 80 people with disabilities 1. System management employed out of a total of 1,200 employees. This involves the designation of an organisational structure within the company to carry out CSR/IB activities so that the functions and responsibilities become clear. Management should also provide support for the implementation of CSR/IB activities. The company benefits from employing people with disabilities since they have proven to be more meticulous in their tasks and show
2. System communication high levels of motivation, productivity and loyalty at work. The disabled employees benefit from receiving a stable income and gaining
Communication is important to safeguard the interests of every stakeholder. A good communication system can also be a way to confidence and self-esteem as a result of being treated equally by the company and being able to make an independent living. get feedback and provide advocacy among stakeholders.
3. Financial system
Good documentation of financial transactions helps to ensure financial transparency among stakeholders. Companies can also Five success factors allocate budgets carefully so that the company can support programmes with an adequate budget.
4. System monitoring and evaluation While identifying opportunities for strategic CSR activities is important, the internal CSR management and operational procedures are also crucial for CSR activities to become successful in achieving the targeted impact. Evaluation of the programme should be done periodically in order to assess results vis-à-vis the indicators and goals of the company. Based on the PBSP’s Corporate Citizenship System & Process Management Framework (see p. 9) the participating companies were analysed Based on the interviews conducted, the systems are highly varied among companies, although the functions to implement the programmes according to their performance in the respective five elements conducive to the success of CSR programmes. The best practices of these as such are well defined and structured. Some companies embedded the function within HR departments or external affairs departments, companies are detailed below. such as PT. Adis Dimension Footwear. In this case, designated personnel are in place to take the responsibility for the operational aspects of the activities. Companies with separate CSR units are more focused, gain sufficient budgetary support, and prove to have better commu- nication between management and the beneficiaries or stakeholders involved. 1. Leadership
Leadership is the key driver for the company to bring new and innovative CSR activities to life. The implementation of strategic CSR requires a strong commitment to these activities by senior management and benefits from CSR ‘champions’ that serve as a reference point and role model for the activities within the company. Effective leadership in strategic CSR includes the integration of activities within the core business procedures of the company and the communication of CSR as such. Effective leadership also translates into the ownership of CSR activities by management, thus establishing accountability in achieving reaching CSR targets.
26 23
From CSR to Inclusive Business From CSR to Inclusive Business Some aspects of CSR leadership are: Effective policies have at least the following elements:
1. Members of senior management act as role models and are exemplary in upholding the principles and values of the company. 1. The policy is appropriate and consistent with the principles of the company’s overall business.
2. Supports and is committed to the goals and objectives of CSR/IB programmes and ensures programmes are coherent. 2. The policy must be clear, focused and in writing so that it can be used as a reference in the implementation of the programme.
3. Company management takes full responsibility for the positive and negative impacts of policies and practices of CSR/IB. 3. The policy should be communicated and distributed to all stakeholders.
Most respondents from the survey reported that their CEOs have strong commitment to CSR and that CSR initiatives are embedded The best example for implementing CSR in companies is through the code of conduct or company regulations. Company regulations are throughout the organisation. One of the companies mentioned that the establishment of the company was related to health concerns in the created so that policy becomes easier to understand and can be easily communicated to stakeholders. For example, PT. Adaro Indonesia has community, and that a value created by the founder is embedded in the company and has become company culture. prescribed ‘iMore’ as the integral company values: integrity - meritocracy - openness - respect - excellence. iMore is communicated in various ways through the media (electronic and non-electronic), at the onset of employment and during other engagements, so that it has now Strong leadership may also come from the need to comply with national laws, international regulations, a global code of conduct and rising become the guideline for employees in all business activities. stakeholder expectations, and these forces also enable them to translate CSR principles and policies into concrete action. PT. HM Sampoerna, Tbk, on the other hand, has its ‘Three Hands Philosophy’ in place, aiming at a harmonious relationship between the company, business partners and the community. This philosophy, which underpins everything the company does, represents PT. HM Sampoerna, Tbk.’s commitment to meeting or exceeding the expectations of their three most important stakeholder groups – adult smokers, employees and business partners, and society at large. “If you want to develop a good business, the rst thing to do is your business’s compliance to all regulations.” PT. Unilever Indonesia, Tbk. Indonesia established its CSR policy based on four pillars of their programme, namely the environment, nutrition, hygiene and sustainable agriculture. Harijanto, Ketua Ketenagakerjaan, Dewan Pimpinan Nasional APINDO
3. Programme development
One example where strong commitment enables the company to make sustainable operation is found in PT. Adis Dimension Footwear. The owner of PT. Adis Dimension Footwear believes that compliance in every aspect of business operation is fundamental in practicing social Devising coherent CSR programmes in which different activities have positive synergies is another key element for the success of strategic responsibility and is therefore the primary key for the sustainability of the company. Compliance is another word for being responsible, that CSR. Developing a vision for the overall CSR programme of a company that goes beyond the activity level and strives for systemic change is responsibility towards all of your business stakeholders. Without considering compliance, CSR programmes are only cosmetic and for helps make activities more impactful and beneficial both for the company and the target population. Moreover, clearly defined goals help short-term purposes. Based on this belief, PT. Adis Dimension Footwear created several CSR programmes relating to compliance issues, manage expectations among all stakeholders. Successful programme development should include: such as labour and the environment. As a result, PT. Adis Dimension Footwear has been awarded several times for its involvement in the 1. Engaging stakeholders in the development of the programme so as to identify their needs and establish priorities. Companies environment and has been nominated as the workers’ favourite company in footwear industry. certainly cannot meet the needs of all stakeholders, so this prioritisation is a requirement.
2. Assessing stakeholders and looking at business processes in the enterprise value chain so that the programme can be designed with 2. Policy-setting clear targets and objectives.
3. Ensuring the sustainability and continuity of the programme. The programme can be managed by a unit or be implemented in The presence of clear, focused and written policy is an important element in the implementation of the CSR/IB programme and becomes cooperation with third parties; the continuation of the programme can be ascertained and dealt with by the appropriate people. an integral part of the business. This is done so that the activities undertaken become more relevant and fundamental to the company’s main business activities.
24 25
From CSR to Inclusive Business From CSR to Inclusive Business Some aspects of CSR leadership are: Effective policies have at least the following elements:
1. Members of senior management act as role models and are exemplary in upholding the principles and values of the company. 1. The policy is appropriate and consistent with the principles of the company’s overall business.
2. Supports and is committed to the goals and objectives of CSR/IB programmes and ensures programmes are coherent. 2. The policy must be clear, focused and in writing so that it can be used as a reference in the implementation of the programme.
3. Company management takes full responsibility for the positive and negative impacts of policies and practices of CSR/IB. 3. The policy should be communicated and distributed to all stakeholders.
Most respondents from the survey reported that their CEOs have strong commitment to CSR and that CSR initiatives are embedded The best example for implementing CSR in companies is through the code of conduct or company regulations. Company regulations are throughout the organisation. One of the companies mentioned that the establishment of the company was related to health concerns in the created so that policy becomes easier to understand and can be easily communicated to stakeholders. For example, PT. Adaro Indonesia has community, and that a value created by the founder is embedded in the company and has become company culture. prescribed ‘iMore’ as the integral company values: integrity - meritocracy - openness - respect - excellence. iMore is communicated in various ways through the media (electronic and non-electronic), at the onset of employment and during other engagements, so that it has now Strong leadership may also come from the need to comply with national laws, international regulations, a global code of conduct and rising become the guideline for employees in all business activities. stakeholder expectations, and these forces also enable them to translate CSR principles and policies into concrete action. PT. HM Sampoerna, Tbk, on the other hand, has its ‘Three Hands Philosophy’ in place, aiming at a harmonious relationship between the company, business partners and the community. This philosophy, which underpins everything the company does, represents PT. HM Sampoerna, Tbk.’s commitment to meeting or exceeding the expectations of their three most important stakeholder groups – adult smokers, employees and business partners, and society at large. “If you want to develop a good business, the rst thing to do is your business’s compliance to all regulations.” PT. Unilever Indonesia, Tbk. Indonesia established its CSR policy based on four pillars of their programme, namely the environment, nutrition, hygiene and sustainable agriculture. Harijanto, Ketua Ketenagakerjaan, Dewan Pimpinan Nasional APINDO
3. Programme development
One example where strong commitment enables the company to make sustainable operation is found in PT. Adis Dimension Footwear. The owner of PT. Adis Dimension Footwear believes that compliance in every aspect of business operation is fundamental in practicing social Devising coherent CSR programmes in which different activities have positive synergies is another key element for the success of strategic responsibility and is therefore the primary key for the sustainability of the company. Compliance is another word for being responsible, that CSR. Developing a vision for the overall CSR programme of a company that goes beyond the activity level and strives for systemic change is responsibility towards all of your business stakeholders. Without considering compliance, CSR programmes are only cosmetic and for helps make activities more impactful and beneficial both for the company and the target population. Moreover, clearly defined goals help short-term purposes. Based on this belief, PT. Adis Dimension Footwear created several CSR programmes relating to compliance issues, manage expectations among all stakeholders. Successful programme development should include: such as labour and the environment. As a result, PT. Adis Dimension Footwear has been awarded several times for its involvement in the 1. Engaging stakeholders in the development of the programme so as to identify their needs and establish priorities. Companies environment and has been nominated as the workers’ favourite company in footwear industry. certainly cannot meet the needs of all stakeholders, so this prioritisation is a requirement.
2. Assessing stakeholders and looking at business processes in the enterprise value chain so that the programme can be designed with 2. Policy-setting clear targets and objectives.
3. Ensuring the sustainability and continuity of the programme. The programme can be managed by a unit or be implemented in The presence of clear, focused and written policy is an important element in the implementation of the CSR/IB programme and becomes cooperation with third parties; the continuation of the programme can be ascertained and dealt with by the appropriate people. an integral part of the business. This is done so that the activities undertaken become more relevant and fundamental to the company’s main business activities.
24 25
From CSR to Inclusive Business From CSR to Inclusive Business Some of the surveyed companies place the CSR function within the human resources department or in the external relation division. This Activity: Workers with Disabilities demonstrates that many CSR activities or initiatives are related to managing workplace concerns. This is the case with PT. Adaro Indonesia Company name: PT. Trimitra Baterai Prakasa (Mandatory Basic Training for HSE), PT. Adis Dimension Footwear (school programme and scholarships) and PT. HM Sampoerna (Unlimit Activity description: Yourself Employee Program). In other cases, companies collaborate with development organisations, foundations or universities, or hire As one of the company’s efforts to provide equal employment opportunities for people with professional development implementers or experts to implement projects (e.g. community development projects). One example of such practice is the case of PT. HM Sampoerna establishing partnerships with NGOs/foundations to increase their administrative skills and disabilities, especially for the deaf and mute community, the company is working with an organisational capabilities and to upgrade them to be eligible partners according to the internal company standards. Another example is orphanage foundation. The project is being implemented under the supervision of the conducted by Unilever Indonesia on engaging experts from reputable universities to assist farmers (such as soybean farmers) in increasing their production. Social Department since 2007 and has been supported by the Jakarta local authorities. At the Photo: PT. Trimitra Baterai Prakasa Trimitra Photo: PT. Disabled employees in the production area beginning, the project was based on charitable motives. However, with time, the company 4. System instalment wanted to increase their contribution to creating jobs for disabled persons. PT. Trimitra Baterai Prakasa provides the same employment conditions to their deaf and mute employees as their other employees, which means full-time employment and equal employment
To ensure that implementation can proceed smoothly, some systems and components must be put in place. These components include: rights and expectations. However, due to safety reasons, employees with disabilities are provided with different coloured uniforms
and are usually placed at working stations with minimum working risks. At the moment there are more than 80 people with disabilities 1. System management employed out of a total of 1,200 employees. This involves the designation of an organisational structure within the company to carry out CSR/IB activities so that the functions and responsibilities become clear. Management should also provide support for the implementation of CSR/IB activities. The company benefits from employing people with disabilities since they have proven to be more meticulous in their tasks and show
2. System communication high levels of motivation, productivity and loyalty at work. The disabled employees benefit from receiving a stable income and gaining
Communication is important to safeguard the interests of every stakeholder. A good communication system can also be a way to confidence and self-esteem as a result of being treated equally by the company and being able to make an independent living. get feedback and provide advocacy among stakeholders.
3. Financial system
Good documentation of financial transactions helps to ensure financial transparency among stakeholders. Companies can also Five success factors allocate budgets carefully so that the company can support programmes with an adequate budget.
4. System monitoring and evaluation While identifying opportunities for strategic CSR activities is important, the internal CSR management and operational procedures are also crucial for CSR activities to become successful in achieving the targeted impact. Evaluation of the programme should be done periodically in order to assess results vis-à-vis the indicators and goals of the company. Based on the PBSP’s Corporate Citizenship System & Process Management Framework (see p. 9) the participating companies were analysed Based on the interviews conducted, the systems are highly varied among companies, although the functions to implement the programmes according to their performance in the respective five elements conducive to the success of CSR programmes. The best practices of these as such are well defined and structured. Some companies embedded the function within HR departments or external affairs departments, companies are detailed below. such as PT. Adis Dimension Footwear. In this case, designated personnel are in place to take the responsibility for the operational aspects of the activities. Companies with separate CSR units are more focused, gain sufficient budgetary support, and prove to have better commu- nication between management and the beneficiaries or stakeholders involved. 1. Leadership
Leadership is the key driver for the company to bring new and innovative CSR activities to life. The implementation of strategic CSR requires a strong commitment to these activities by senior management and benefits from CSR ‘champions’ that serve as a reference point and role model for the activities within the company. Effective leadership in strategic CSR includes the integration of activities within the core business procedures of the company and the communication of CSR as such. Effective leadership also translates into the ownership of CSR activities by management, thus establishing accountability in achieving reaching CSR targets.
26 23
From CSR to Inclusive Business From CSR to Inclusive Business A similar programme that focuses on training the local workforce in remote areas was called into life by PT. Sinar Mas Tbk. Some companies also expressed that the activities still feel ‘ad-hoc’ and do not have clear guidelines. To address this, the company may wish to conduct consultation sessions with involved stakeholders (employees or the community, for example), or leaders of the community to Activity: Scholarship identify strategic issues that can form the basis of the CSR agenda. Target object: Community Company name: PT. Sinar Mas Tbk. – Downstream Companies have in general installed good systems to provide information on its programmes and projects (such as newsletters and other Activity description: media), communicate CSR initiatives to internal and external stakeholders, and hold interactive sessions to disseminate information as well as gather feedback. Companies with a large workforce, such as manufacturing companies, inform their workers through bulletin boards, Companies in the pioneer operation of the factory in remote areas found it difficult to attract local employees who have higher levels which proves so far to be effective. One example of this is PT. Adis Dimension Footwear, which produces internal employee bulletins of education. The company brought employees from outside the area, but this resulted in a high turnover rate among experienced informing everyone in the company in detail on their CSR activities.
employees. To solve this problem, the company works closely with a local university by giving scholarships to students based on a
certain arrangement. After graduation, the students are mandated to work for the company for a certain period of time. Now, for 5. Measurement and reporting
facilities in Tarjun, Kalimantan, more than 75% of employees are locals with a greater level of company loyalty, and the rate of Finally, adequate monitoring and evaluation is essential to assess and further develop successful CSR programmes and make them even more turnover has decreased sharply, resulting in lower cost. strategic in the future by correcting prior shortcomings or erroneous assumptions. This involves:
1. Providing an objective assessment of the programme or initiative that is implemented; Another example is the Center for Occupational Training (COT) programme of PT. Adis Dimension Footwear that offers training that is 2. Providing an overview of the impact resulting from the programme, showing that transactions are carried out both for the nationally recognised and certified, thereby providing local people with opportunities and training that are valuable even beyond the compa- company and the stakeholders involved or affected. ny’s labour needs. 3. The result representing a key component for the development of the next programme because it provides the necessary inputs for the improvement and development of the next programme. Activity: Center for Occupational Training Target object: Community 4. Increasing public and stakeholder awareness, thus triggering an understanding among the stakeholders. Company name: PT. Adis Dimension Footwear Activity description: With regard to programme evaluation and monitoring, most of the companies are able to track down their performance by conducting monitoring and evaluation exercises such as: Recognising the lack of trained and skilled labour in the footwear industry, the company responded by launching the Center for • periodic review of programmes; Occupational Training (COT) programme. This one-month competence-based training provides basic and comprehensive knowledge • consultation with internal/external stakeholders through different kinds of surveys or modes; and on shoe-making techniques, including cutting, preparation and assembly. The training programme has been free-of-charge since • documenting best practices through success stories and testimonials. 2008, and participants who manage to finish the programme are given national certification. The companies view this as particularly vital to monitor CSR activities and ensure that the programmes achieve the target in a timely manner The company does not obligate participants to work for the company. However, should they decide to apply for employment, and within the budget so that the companies are able to report on both regularly to management and related stakeholders and improve the programmes. they are given priority. The result is that the company finds it easier to recruit skilled workers that are up to their standards so that Some companies in this study, such as PT. Unilever Indonesia, Tbk. and PT. Adaro Indonesia, have created sustainability reports that appear internal on-the-job training is no longer required. at regular intervals and report in ways that are comparable over time and allow for the tracking of progress. Another example carried out by the company is newsletter production. PT. Adis Dimension Footwear created a magazine-like newsletter describing its numerous CSR activities throughout the year, which is published periodically. PT. Adis Dimension Footwear said that this magazine is very effective for conveying information about the company and engaging stakeholders, such as the government.
22 27
From CSR to Inclusive Business From CSR to Inclusive Business Several companies can use their available resources to conduct several assessment programmes in their project to measure the impact of Sampoerna also has targeted CSR activities in its sales channels: their activities. The kind of report a company may produce depends on their needs and CSR accomplishments. However, emerging trends Activity: Sampoerna Retail Community in corporate reporting require a triple-bottom-line approach, which includes consideration of the economic, social and environmental Target object: Retailer aspects of business operation. Regular reporting to management is available in all companies to monitor the progress of the programme. Company name: PT. HM Sampoerna, Tbk. Activity description: In addition, several companies already produced a sustainability report as part of their obligation to disseminate information to broader stakeholders. However, a simple and brief in-house annual report of CSR activities appears to be effective in communicating the company’s Sampoerna Retail Community (SRC) is a partnership programme aimed at potential retail outlets which have been selected as business activities as shown by one of the respondents. partners for PT. HM Sampoerna, Tbk. SRC is one of the company’s flagship programmes to engage in business partnerships with
the community and aims to combine promotional activities with the distribution of its products. Here the company is aiming to
strengthen their business partners’ capacity through various capacity-building activities to increase their business skills, such as
providing retail marketing consultations as well as organising financial literacy education courses in collaboration with the company’s
banking partners. To support their retailers on the marketing side, the company assists them in changing their current traditional
outlets into semi-modern retail outlets by providing a set-up including branded table sets and chairs to transform a specific space in
the outlet into an entertainment corner to attract more customers and increase time spent at the outlet. To encourage their customers
to spend more time in the outlet, the owners usually add simple entertainment means such as a TV or chess sets.
Developing the workforce
Another step in achieving more strategic CSR consists of investing in the company’s workforce. PT. Adaro Indonesia, for example, has called into life a workforce development programme that recruits and trains mechanics for the company.
Activity: SIS Training Programme Target object: Community Company name: PT. Adaro Indonesia Activity description:
In order to ensure a consistent supply of trained and skilled workers and to involve the local labour market, the company collaborated
with one of its subsidiary companies to launch a training programme entitled Operator Preparation and Mechanics Preparation
Programme. This programme aims to improve community welfare by providing education opportunities that are tailored to the
companies’ skill needs. The programme began in 2008 and has trained and recruited more than 2,000 operators and mechanics from
the peripheral area of the mining site. Each year, more than 200 individuals graduate from the programme and are recruited into
employment with the company. The training period ranges from 6 months to 12 months, consisting of both theoretical study and
on-the-job training.
While this activity provides opportunities for local communities to gain valuable
education and skills for the labour market, it also helps the company to secure a labour
supply with the adequate skill sets. Photo: PT. AdaroPhoto: PT. Indonesia
28 21
From CSR to Inclusive Business From CSR to Inclusive Business IV. Chapter 4 – INCLUSIVE BUSINESS AS STRATEGIC CORPORATE SOCIAL RESPONSIBILITY
This chapter aims to provide an overview on the state of and potential for IB among APINDO members and offer inspiration and advice on IB for the entire Indonesian business community.
Inclusive business case studies
The CSR activities carried out by the companies surveyed demonstrate the potential of IB to provide benefits not only to the community but also to the companies. The study found there are some CSR activities along the value chains of the companies that can be categorised as IB practices.
PT. Trimitra Baterai Prakasa, for example, applied the IB concept to its surrounding communities to procure supporting equipment for the company taking into account cost and availability. Therefore, the company regards this practice as a regular business activity that also has a large social impact on the community by providing additional income opportunities. The company’s CSR activities focus largely on the employment of the community members, particularly the disadvantaged.
The cornerstone of the company’s actions is set forth in the company’s mission, which is empowering people, particularly the underprivi- leged, as its corporate response to social responsibility. Initially planned as pilot project, the company tried to involve the local community affected by the activities of the company into its CSR activities along the company’s supply chain. After proving that the activity brought about positive results not only for the community but also for the company due to lower costs or better productivity levels, the company was then able to design and implement IB practices.
29
From CSR to Inclusive Business Activity: Water Bath Supply Out of the 63 activities recorded during the interviews, 44 are considered purely philanthropically motivated, whereas 19 activities are Target object: Neighbouring local community considered more market-driven and as IBs or activities with IB potential. The IB activities will be discussed in more depth in the following Company name: PT. Trimitra Baterai Prakasa chapter. Activity description: All of the companies surveyed for this study carry out CSR activities and understand the basic concept of CSR. Many of the activities
The company needs a monthly replacement for water bath containers in the factory. The baths are made from fibreglass material that undertaken are considered donations by management that are necessary to gain public legitimacy or comply with existing regulations.
can be moulded easily. The company noticed that there were individuals with skills in melding fibreglass in the surrounding neighbourhood. Becoming more strategic
The company provided the specifications and supervision in the production process. The practice of CSR in some companies has shifted from a means to improve corporate image to activities that are more strategic and Along with the process, the company educated more people and established coopera- impact-focused. Often, these new activity fields are more closely related to the company‘s core business. These changes have often been tion through the karang taruna (youth local organisation). The monthly turnover for accompanied by the realisation that CSR is not just an answer to society’s demands for business accountability, but that CSR activities can the water bath supply is between IDR 200 – 400 million. also benefit the company commercially.
Advantages for the company: During the interviews, companies raised a number of benefits of CSR programmes, such as workforce development and retainment or supply chain reliability that make the business case for CSR. Below are a number of examples of such strategic CSR activities, clustered into
• reliable supply as PT. Trimitra Baterai Prakasa also monitors the production; Baterai Prakasa Trimitra Photo: PT. Quality assurance training for the community in two thematic sections. • cost savings through the low cost of transport. the Cilincing area in water bath production
“We cannot run a good business if the surrounding community is poor and marginalised.” Activity: Soybean Farmer Empowerment Sancoyo Antarikso, External Relations Director & Corporate Secretary, PT. Unilever Indonesia Tbk and Board of Target object: Soybean farmers Founders of Indonesia’s Global Compact Network Company name: PT. Unilever Indonesia, Tbk. Activity description:
In order to obtain a sustainable supply and high quality black soybeans, PT.
Unilever Indonesia, Tbk. collaborated with Gadjah Mada University (UGM) in Making use of company strengths 2000 to engage farmers in planting black soybeans. Black soybeans are less
commonly grown than the yellow variety. After thorough research, the malika Companies can make their CSR more strategic by building on the strengths and comparative advantages of the company and its core
Photo: PT. Unilever Indonesia, Tbk. Photo: PT. soybean variety was introduced to farmers in collaboration with UGM. The business activities. distribution of seed was free, and PT. Unilever Indonesia, Tbk. provided training, consultation and supervision to farmers. As a One interesting example from the surveyed companies is PT. Pacific Place Jakarta. The company realised that in reaching its CRS goal of result, soybean farmers were able to increase their production from 1.5 tonnes/ha to 1.9 tonnes/ha, which resulted in additional supporting SMEs in Indonesia, it can make use of its sales structures by utilising unused mall space to give exposure to promising projects
income for farmers. Farmers also received market guarantees from PT. Unilever Indonesia, Tbk. to buy the black soybeans. In from SMEs by organising a one-month exhibition.
addition, the farmers also gained knowledge and skills in sustainable agriculture practices. The programme covered more than 50
kabupaten in Java and has trained more than 9,000 farmers, including 2,000 women.
30 19
From CSR to Inclusive Business From CSR to Inclusive Business Activity: Providing Space for Food Vendors III. Chapter 3 – Analysis of the sample: Target object: Food vendors Company name: PT. Adis Dimension Footwear General findings Activity description:
One of the problems the company faces is a logistical matter, namely providing lunch for its thousands of workers. Allowing workers This chapter presents an overview of the CSR activities of the surveyed companies and describes the factors relevant to the success of their to leave the premises to find meals would create a bigger problem: there is no guarantee the food is hygienic and it may compromise CSR programmes. worker attendance as their work time could be reduced through lateness or food-borne illness. To respond to this issue, the company Activity spectrum launched a programme by providing space in the peripheral area of the company for food hawkers to sell their goods. The company provides training in food handling, food safety and waste management.
The seven companies surveyed for this study have a total of 63 CSR activities in place. These activities are of a very different nature, from As a result, there is currently a waiting list of workplace improvement measures to education opportunities for employees or income opportunities for surrounding communities. Rather hawkers waiting to open their stations in this than mapping the activities by sector or the relevant target groups, the study examined how they relate to the core business of the company and how the companies value these activities and understand their role in facilitating them. area because it is much more profitable and
safe. The company also benefits from a The CSR activities were plotted along the ‘continuum of social investment’ adapted from the European Venture Philanthropy Association (EVPA). Figure 3 below illustrates the spectrum of motivation of CSR activities, from purely philanthropic to purely commercial. This greater degree of discipline and a controlled exercise sheds light on the motivation of the participating companies in operating their CSR programmes and helps identify IB practices quality of food available to its workers. and potentials within the 63 activities. Photo: PT. Adis Dimension Footwear Photo: PT.
Purely Philanthropic Purely Commercial Activity: Rubber Farmer Empowerment Target object: Rubber Farmer Philanthropy / Charity Social Driven Socially Responsible Traditional Business Company name: PT. Adaro Indonesia Non-financial mission Social mission with min. Market driven with social Profit driven Activity description: financial return and / or environmental Mining companies are obligated to conduct reclamations of post-mining areas. Reclamation objectives Impact only Impact first Finance first is a part of the core business operations for a responsible mining company.
PT. Adaro Indonesia realises that in the near future the exploited mining fields will have to Inclusive Business be reforested. One commodity that would be suitable for the area is the rubber plant. In line
Photo: PT. AdaroPhoto: PT. Indonesia with the mission of the company to develop the community’s economy, the company 44 14 5 activities launched a programme for rubber farming. The company provides training and education on strategic rubber farming for optimal yield. The result is that 700 hectares of fallow land have now been reclaimed for rubber farming, involving 7,500 heads of household.
Combining a business operation (reclamation of a post-mining area) with the company’s mission to develop the economy of the
surrounding community is another example of an IB approach. Figure 3. CSR activity spectrum of the surveyed companies, adapted from the European Venture Philanthropy Association’s continuum of social investment
18 31
From CSR to Inclusive Business From CSR to Inclusive Business Activity: Koperasi Adis The ISO 26000 standard mainly provides guidance on the principles of CSR practices and the contribution of companies to sustainable Target object: Employees development. Due to the vast global differences in company culture and ethics, ISO does not, however, provide certification for the 26000 Company name: PT. Adis Dimension Footwear standard. There are seven core subjects covered by ISO 26000, which are: organisational governance, human rights, labour practice, Activity description: environment, fair operating practices, consumer issues, and community involvement & development.
Workers often times need extra funds to meet personal needs, such as children’s tuition and The standard thus promotes CSR activities which are not only aiming at community development or creating broader value for society, but
other expenses. It is clear that the company will not be able to meet all its workers’ needs, also internal aspects of the company and the way it runs its operations.
especially due to its large workforce. To respond to this issue, the company provided initial Another set of guidelines commonly used in the corporate sector with a particular focus on CSR reporting and sustainability practices is the Sustainability Reporting Guidelines published by the Global Reporting Initiative. The fourth generation of these Sustainability Reporting capital and formed a cooperative body that functions as a savings and loan facility for the Guidelines was released in May 2013.7 workers. It is also meant to improve the welfare of the workers. The cooperative also performs Photo: PT. Adis Dimension Footwear Photo: PT. Another influential voice in the CSR space is the United Nations Global Compact and its Global Compact Principles, which sets 10 basic functions other than the designated savings and loan function, such as Adis Mart, an outlet where members can shop using an principles for companies on doing CSR, including elements relating to human rights, labour, environment and anti-corruption. United integrated card system. The Adis Mart also offers courier and online payment services, which enables employees to pay their utility Nations Global Compact chapters exist in many countries worldwide. The Global Compact chapter in Indonesia counts 117 signatories. The OECD Guidelines on Responsible Business Conduct also serves as a framework reference, though MNEs generally have more elaborate bills, e.g. for electricity, and uses a state-of-the-art IT system. The system was developed internally based on open-source models and CSR programmes in place already. enables workers to further increase the quality of their work. Presently, Adis Mart is operating on IDR 5 billion of revenue per month.
Because of the success of its cooperative model, the company regularly receives visits from various third parties (companies, government, cooperatives, universities and international visitors) for peer-to-peer learning and knowledge exchange.
7 Further information on the Global Reporting Initiative and a range of useful tools for interested companies can be found at https://www.- globalreporting.org.
32 17
From CSR to Inclusive Business From CSR to Inclusive Business International corporate social responsibility guidelines Opportunities
The study revealed that there are a number of benefits derived from the implementation of IB, namely: A number of global standards also bear relevance for Indonesia and can drive the adoption and improvement of CSR activities in the country. One of the most influential standards was devised by the International Organization for Standardization (ISO), which published 1. Companies can reduce procurement costs of goods and raw materials, both in terms of efficiency and continuity. An example is PT. ISO 26000 in 2010 as a guide for organisations or companies to operate in a socially responsible manner. Trimitra Baterai Prakasa and its water bath supply programme. Companies do not just get a cheaper price; they are also assured of the quality and continuous supply of the necessary equipment every month.
2. Workforce issues, particularly the inability to find qualified employees, are a problem that most companies faced. Companies that provide Holistic approach training to the underprivileged, particularly the local population, can produce employees with improved skills and productivity as well as a high level of company loyalty. This is proven by the opening of training centres by PT. Adis Dimension Footwear to train locals in 6.8” Community sewing and shoe-making. This allows PT. Adis Dimension Footwear to solve workforce problems and attract employees with the involvement 6.3” required skills and a high level of company loyalty, thus increasing productivity. and Human right” development 3. Supply chain/security of supply can be an obstacle for companies especially relating to agricultural products. Community participation in the supply chain can be a solution to this problem. A successful example is PT. Unilever Indonesia, Tbk. with its empowerment of black soybean farmers on the island of Java. 6.2” Organizational
6.7” 6.4” Consumer ORGANIZATION Labour Challenges issues practices
The problems faced in launching an inclusive activity posed a challenge to the companies. These problems include: governance 1. Lack of adequate skills and knowledge in the BOP. This makes it challeng- 6.5” 6.6” ing for companies to include the low-income population in the company’s “We are helping our business partners Fair operating The value chain. environment improve their capabilities.” practices 2. The information gap and the lack of understanding in the company of IB. Companies report that they are not able to implement IB because they Sancoyo Antarikso, External Relations Director Interdependence usually do not deal directly with disadvantaged communities. & Corporate Secretary, PT. Unilever Indonesia Tbk and Board of Founders of Indonesia’s 3. Lack of a regulatory framework. The lack of clear regulations regarding Global Compact Network the implementation of CSR becomes an obstacle for companies to innovate IB strategies. Companies operating mainly around natural Figure 2. ISO 26000 Core Subjects resources, for example, require guidance as to which CSR activities are approved or not approved, so that they are able to annually budget for such activities due to the large amount of resources needed for CSR, both material and immaterial. 1) Organizational Governance: This core subject refers to how your business makes and implements strategic decisions; 2) Human Rights: This core subject is based on the Universal Declaration of Human Rights (adopted by the UN General Assembly in 1948); 4. Limited access to finance. Because IB is still considered as a social activity or as activities with hard-to-measure risks by financial institutions 3) Labor Practices: For this core subject, the ISO 26000 refers to the ILO (International Labor Organization), the international governing body in Indonesia, and because people are still deemed ‘not bankable’, financial institutions disburse loans less freely unless companies are able for labor practices; to substantiate the loans with assets and reputation as collateral. For this reason, PT. Adis Dimension Footwear allocated its own money 4) The Environment: The environmental principles of this core subject are: Environmental responsibility; The precautionary approach; for the start-up capital of its cooperatives. Environmental risk management; and The polluter pays;
5) Fair Operating Practices: This core subject focuses on the ethical conduct in a business’s dealing with its stakeholders; 5. Lack of infrastructure facilities. Farmers usually live in rural areas that have limited road and transportation access. This results in high 6) Consumer Issues: This core subject deals with your business’s responsibility for minimizing risks in the use of your service or product; transport costs, thus reducing their competitiveness. 7) Community Involvement and Development: The ISO 26000 states that “Community involvement and community development are both integral parts of sustainable development”.
(http://www.sustainability4success.com/iso-26000-II.html)
16 33
From CSR to Inclusive Business From CSR to Inclusive Business Inclusive business potential
Law No. 40/2007 on Limited Company The analysis in the previous chapter shows that IB activities have been carried out by companies participating in this study. Each corpora- tion, aware or unaware, has conducted IB to a certain degree in their operation. Chapter V
The core problem among companies is the comprehension of IB in itself. Some companies are unaware that some of their activities are Social and Environmental Responsibility indeed IB practices, for example, the water batch supply programme launched by one of the respondent companies. At first the programme Article 74 was viewed as a regular business programme. The company initially did not realise that the programme has social impacts. (1) Companies operating on and/or related to natural resources are obligated to carry out Social and Environmental Responsibilities.
In general, the activities carried out by the companies are still philanthropic or charity-based without consideration of financial gains or (2) Social and Environmental Responsibilities as prescribed in Section (1) refers to the obligation of the corporation as budgeted and benefit. This is essentially in line with one of the missions/goals adopted by the companies: participating in improving the welfare of the calculated as borne by the corporation and implemented through decency and properness considerations. community. (3) Corporations that deny the obligation as prescribed in Section (1) are liable to sanction in accordance to the law.
(4) Further conditions on Social and Environmental Responsibilities are stipulated through Government Regulation.
Today, there are at least seven national laws and local regulations related to CSR that are both regulatory and redistributive in nature. The government strives to encourage companies to actively participate in social activities with the issuance of these regulations. While this is a great achievement in terms of creating awareness on CSR, the regulatory approach of Indonesia also has its drawbacks.
However, these rules create confusion among implementers in the field. Differences in understanding CSR have led to the varying implementation of CSR in each region, as well as the development of local regulations that vary regarding CSR. This lack of clarity in regulations has become an obstacle for the companies to carry out CSR programmes. Companies operating in the regions must seek approval from the local government to carry out CSR activities by holding annual meetings with governmental agencies. As a result, many companies conduct CSR activities just to meet current regulations, but they do not risk being innovative in their programming. Such a mandatory approach to CSR is input-focused (amount of investment) rather than focusing on the outputs and impact of CSR programmes to evaluate if they comply with regulation.
Nevertheless, the publication of these regulations translates into increasing awareness and understanding of the importance of CSR among relevant stakeholders.
34 15
From CSR to Inclusive Business From CSR to Inclusive Business II. Chapter 2 – DRIVERS OF CORPORATE V. Chapter 5 – CONCLUSION SOCIAL RESPONSIBILITY IN INDONESIA AND RECOMMENDATIONS
(1) There is still a perception among the business community as well as regulators in Indonesia that CSR is only related to social motives. This chapter aims to provide an overview of some of the drivers of CSR in Indonesia. The philanthropic practices of companies all over The goal of the majority of CSR programmes being implemented by respondent companies is to empower their social stakeholders. In the archipelago are very different, partly due to the religious and cultural diversity in Indonesia. This diversity makes it difficult to achieve implementation, the majority of companies use an approach that does not consider the long-term sustainability of activities, both from comparability between different companies to get a better idea of the state of CSR in Indonesia. Nevertheless three drivers considered the private sector’s side (e.g. implementing CSR activities as part of the company’s ‘social cost’, burden or obligation rather than as an important by the authors are listed below, though they are by no means exhaustive. investment) and from the side of the community targeted by the CSR (e.g. short-term project with low impact).
(2) From this study, there is a potential for Indonesian companies to make their CSR activities more strategic, incorporate sustainability and Tradition and cultural expectation also create mutual benefits for the companies as well as beneficiaries. Using the inclusivity principle in the supply chains of companies as part of their CSR activities is one way of implementing strategic CSR. This practice, which is called IB, is believed to, as demonstrated in this study, increase the effectiveness of the private sector’s role in fostering development in Indonesia.
(3) The success of shifting companies’ CSR activities from philanthropic or charitable to strategic is determined by the leadership of “Corporate social responsibility is the continuing commitment by business to behave companies and their management. Their strong commitments to IB should be clearly communicated to company stakeholders and ethically and contribute to economic development while improving the quality of life of translated by their staff into real action, including the development of systems and mechanisms to manage it. To motivate business the workforce and their families as well as of the local community and society at large.” leaders to develop IB models, strong evidence should be presented that shows the social benefits, such as obtaining the social license to operate, and the economic benefits, including maximising profits and/or minimising risks (e.g. strengthening value chains, expanding World Business Council for Sustainable Development the labour pool, or developing new markets).
(4) IB activities could be practiced by any kind of company in Indonesia, regardless of their size (small, medium or large), type of industry (garment, consumer goods, manufacturing, mining, etc.) and ownership (national, multinational, family-owned or state-owned), as long Much of the CSR activity undertaken in Indonesia is motivated by the notion of ‘giving something back to the community’. Traditionally, as they can map the opportunities to include the BOP or vulnerable and poor people into their supply and/or value chains, adapt their companies help people in the form of donations given at national celebrations and religious events, as well as in the aftermath of natural business process to allow the BOP to take part in supply or value chains, and leverage the strengths of the BOP to ensure they meet the disasters to repair and develop public and social facilities. Therefore, up to now, companies often still understand CSR activities as a compa- standards required by the Industry. ny’s moral obligation to the community. (5) Another success factor in practicing IB is understanding the challenges to come (such as information gaps, limited skills and knowledge, lack of access to financial capital, lack of infrastructure facilities and ineffective regulatory frameworks) and knowing how to mitigate those challenges. To overcome the challenges, the company can collaborate with other businesses (or business associations) or Regulation sometimes with non-traditional partners, such as non-governmental organisations (NGOs) and public service providers. Through such collaborations, companies can gain access to complementary capabilities and pools of resources to overcome those challenges. At the same time, government regulation has become a central driver for the adoption and implementation of CSR activities in recent years. According to Law No. 40/2007 on Limited Company, whose activities are related to natural resources, these companies are required to demonstrate social and environmental responsibility. Most of them comply with this requirement by spending around 3% of the companies’ annual profit on CSR activities. With the enactment of this law, Indonesia was the first country to introduce mandatory social responsibility legislation.
14 35
From CSR to Inclusive Business From CSR to Inclusive Business Lastly, this study proposes seven recommendations for APINDO member companies as well as other companies in Indonesia to make their CSR more strategic: Methodology
The study is based on a combination of desk study, semi-structured interviews and mapping.
1. Participate in regular exchange formats with other APINDO member companies to discuss best practices and challenges in The company interviews and analysis were guided by the Corporate Citizenship System & Process Management Framework by the Philippine CSR and identify synergies between companies. Business for Social Progress (PBSP) Corporate Citizenship Center6. This tool was designed by the PBSP to assist companies in developing and implementing effective CSR programmes based on five essential elements: leadership, policy-setting, programme development, systems installation 2. Promote ownership of CSR activities by employees and management through better information materials, site visits and and measurement and reporting. For the purpose of this study, the framework was simplified to examine how the surveyed companies’ CSR events. programmes perform in these respective five elements.
3. Consider investing in Human Resource Development as part of their strategic CSR policy and combine internal Human Resource Development with outreach and training programmes for the community (ideally as formal education programmes ent • instead of short-term informal trainings). estm Env Inv iro al n ci Develop m o am me en 4. View CSR as a long-term activity and develop a vision for CSR programming that builds on longer timeframes to create more S gr nt t • ro a l sustainable programmes. n P S r S t e y e c s w g t n n e a o i m 5. Take a value-chain approach to CSR by analysing potentials for CSR activities along the whole value chain of the company. t r t d C
e I s
n e S h
s
c i
y
p t
a
a c
l
i
6. Identify and develop IB potentials in value chains and document findings to work as champions to inspire other companies. Leadership
l
l
•
l p
a
o
k C t
P
r i
o
o
o
n
r
7. Align CSR activities with SDGs to facilitate the evaluation and tracking of shared impact on a global scale. p
W
g o
g
n
r
i
M
t
n a
i r
t
e
o g
e a
p
s
a
-
e
u
r C
8. Create in-depth case studies of best practices as learning materials and liaise with business schools to promote the topic in R n
e Figure 1. Corporate Citizenship System & m
d n e a a n
t
o
m
M
academia. Process Management Framework m
•
u
p
i
n
h
i t s y r
e by the Philippine Business for P
n a t r Social Progress (PBSP) Corporate Citizenship Center
First, a comprehensive review of standard literature on CSR, IB and related topics in Indonesia was conducted, including the regulatory framework, to give an overview of the status quo. This desk review was complimented by qualitative findings from the company surveys in terms of the drivers of their CSR activities. Consequently, the CSR activities of the participating companies were categorised and mapped along an activity spectrum to get an overview of the different approaches evident in CSR activities in which APINDO member companies are engaged. The activities were then examined with regard to the five success factors for strategic CSR adopted from the PBSP framework. In a third step, the IB activities were examined in detail to determine the opportunities and challenges facing participating companies in IB activities.
6 Philippine Business for Social Progress (PBSP) Corporate Citizenship Center (2002): Corporate Citizenship System & Process Management Framework.
36 13
From CSR to Inclusive Business From CSR to Inclusive Business Inclusive business VI. Chapter 6 – CSR Assessment Tool Simple steps to review your own CSR strategy G20 Inclusive Business Framework Inclusive businesses provide goods, services, and livelihoods on a commercially viable basis, either at scale or scalable, to Goals of the assessment tool people living at the bottom of the [economic]pyramid (BOP), making them part of the value chain of companies’ core This assessment tool uses three simple steps to identify strategic CSR potential within your business operations. Specifically, it helps you to: business as suppliers, distributors, retailers, or customers. In addition to these commercially inclusive activities, businesses 1. review the main success factors for CSR in your company (status quo); may also pursue broader socially inclusive goals. Inclusive business should promote sustainable development in all its 2. identify measures to make your CSR activities more strategic (in the future); dimensions: economic, social and environmental.
3. identify potential for inclusive business models.
Among the practices companies employ to make their CSR activities more strategic is IB. Three simple steps IB is a strategic business practice that creates added value for companies through the involvement of the lower income groups of the population pyramid (bottom of the pyramid (BOP)) into the company’s value chain as suppliers, employees, distributors or consumers. IB Step Step Step models are mutually beneficial, meaning that both the businesses and lower income population benefit from the business relationship. 01 02 03 One of the great strengths of IBs is that they are usually not dependent on philanthropic contributions but are rather, once up and running, Analyse the Identify action Draw a spider graph commercially viable through their own revenue streams or cross-financing models. current status of your needed to make CSR improvements IBs create positive impact for low-income communities3 in various ways, which include:
1. empowering marginalised communities;
2. increasing household incomes; How would you rate your own Where do your company’s strengths Identify whether your current CSR
3. raising productivity; performance with regards to the lie in terms of strategic CSR? What measures can be replaced or
4. addressing basic needs, such as water, electricity, etc. success factors for strategic CSR as are the factors in your success? complemented by an inclusive
IB models have been developed in many different sectors, such as agriculture, tourism, ICT, health care or education4. In Indonesia, there described earlier in this study? Which of them could you improve business model? is great potential for companies to put IB models into place, as the amount of population that can be considered as BOP is substantial. and which would you like to According to a study by the Asian Development Bank (ADB) and the Netherlands Development Organisation (SNV)5, about 119 million improve? people in Indonesia (49% of the population) live on less than USD 2 per day. This means that there is not only a large market in the BOP, but also a large workforce.
Step-by-step assessment guide
Step 1: Analyse the current status of your CSR strategy
• Background reading: Chapter 3 - Success factors
• Use the table in Guiding questions for five success factors to draw up a profile of your existing CSR strategy and its relative performance by answering the questions in the table and then, based on those answers, rate yourself on a scale of 1 (lowest level for 3 UNDP (2008). Creating Value for All: Strategies for Doing Business with Poor. that indicator) to 5 (highest level for that indicator). 4 For a list of sectoral guides to IB models authored by GIZ, visit https://www.giz.de/Wirtschaft/de/html/1745.html. 5 ADB and SNV (2013). Developing the Business Case for Investing in Inclusive Business in Indonesia – A Market Scoping Study.
12 37
From CSR to Inclusive Business From CSR to Inclusive Business Step 2: Draw a spider graph
• First, transfer your own rating from the exercise in Step 1 to the spider graph below, marking the scores you would give yourself for each of the five dimensions.
• Second, take a moment to think about the dimensions in which you rate your performance as very high. What elements, people, activities or other factors make this success possible and how does it impact your business?
• Finally, assess those dimensions where there is room for improvement and try to draft some ideas about how they could be improved (see also Step 3).
Example of a spider graph
Leadership 5
4
3
2 Measurement Policy-setting & reporting 1
System Program installment development
Existing CSR Profile
38
From CSR to Inclusive Business Spider graphic exercise
Leadership 5
4
3
2 Measurement Policy-setting & reporting 1
System Program installment development
NOTES:
39
From CSR to Inclusive Business Step 3: Identify action needed to make improvements
• The final step of this exercise, Step 3, helps you to identify whether your current CSR activities can be replaced or complemented by an inclusive business model. The more questions you answer with yes, the stronger your potential for transforming your CSR activities into inclusive business models.
a. Does your value chain include low-income communities (BOP) as customers, suppliers, employees or business partners (e.g. distributors) and is this component of your value chain part of, or close to, your core business?
i. If yes: have you identified, or could you identify, opportunities for improving their livelihoods directly through your core business processes?
ii. If no: is there a way to include more people from this group, while ensuring a positive impact?
b. Does your CSR strategy currently aim to achieve poverty alleviation for your local community?
c. Are any of your CSR activities financially viable business models or could they be transformed into such?
i. If yes: is the business model scalable or replicable?
ii. If yes: is the business model financially, environmentally and socially sustainable?
iii. If yes: does the business model generate benefits for the community (not by exploiting them!)?
iv. If no: are there any opportunities to engage in other CSR activities, which are closer to your core business and could also be financially viable?
• If you were able to answer yes to many of these questions, you might want to develop these ideas further so that your business and the community can reap the mutual benefits of inclusive business models.
• Should you need any further advice, we have compiled a list of pointers for further reading and useful contacts at the end of this publication.
40
From CSR to Inclusive Business I. Chapter 1 – ABOUT THIS STUDY Guiding questions for five success factors Instructions: Please categorize your answer into one of three options: Yes, no, or somewhere in between. Then convert that answer into a number (Yes = 1, No = 0, somewhere in between = 1/2). To get the final rating, add up the numbers for all five questions and then divide by 5 to work out the Objectives average.
This study is a result of the close cooperation between the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and The Success Factors Answer Score (1-5) Employers’ Association of Indonesia (APINDO). On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), GIZ works extensively on corporate social responsibility (CSR) and inclusive business (IB) all over the world and I. Leadership explores how such approaches can best contribute to sustainable development. (1) Is your senior management engaged in drafting the CSR strategy? In Indonesia, GIZ and APINDO have teamed up with the goal of promoting strategic CSR practices among companies based in the region. (2) Does your CSR manager (if you have one) report directly to senior management? As one of the largest and most influential business associations in Indonesia, APINDO is perfectly placed to be an agent of change for the
adoption of more strategic CSR practices in the country. It is hoped that this study marks a first step towards this goal. (3) Does your senior management lead by example/is it actively involved in the implementation of CSR activities? Based on in-depth case studies of the CSR practices of seven APINDO member companies, this study aims to:
(4) Does your senior management actively support employees in getting engaged in CSR 1. give insight into the current state of CSR in Indonesia and identify opportunities and challenges for the further development of activities? strategic CSR practices with a specific focus on IB models;
(5) Does your senior management embrace and celebrate the impacts achieved through CSR 2. raise awareness among APINDO and the broader business community in general of opportunities to implement strategic CSR, which activities as part of the company’s core business performance? at the end may lead to the discovery of IB opportunities and potential investments in education and workforce development;
II. Policy-setting 3. provide concrete examples and best practices from APINDO member companies in order to inspire and promote strategic CSR and
IB models in Indonesia. (1) Do you have coherent policies and strategies in place that lead your business activities and are also applicable for implementing CSR programmes?
Respondents (2) Are there clear links between the CSR strategy and the overall goals and key perfor- mance indicators of your company?
Companies’ selection criteria is based on their availability and willingness to participate in the study and be registered as an APINDO (3) Are the current policies guiding your CSR activities appropriate and consistent with the member. The study is intended to gain key insights into and recommendations on the strategic implementation of CSR practiced by selected company's overall business principles and vice-versa? APINDO member companies. (4) Are current policies communicated and distributed to all stakeholders?
There are seven company participants, which are categorised by the ownership criteria, meaning whether they are a national / local company (5) Do your company’s vision and mission reflect the values and impacts pursued within your (local) or a multinational company (MNC). This categorisation is based on the assumption that there is a differentiation in terms of values CSR activities? and principles in practicing CSR in the different categories, which will be analysed through the study. III. Programme development
(1) Do you engage your key stakeholders (e.g. customers, employees, stakeholders, local community and public authorities) in the development of the programme by identifying and addressing their needs?
(2) Do you take into account all business processes in your company’s value chain when designing the CSR programme, so that the programme is coherent and specifically designed to support your targets and objectives?
(3) Does your CSR strategy go beyond the activity level and does it instead strive for systemic change and progress, both within the company and the target population of the activities (if external)?
08 41
From CSR to Inclusive Business From CSR to Inclusive Business (4) Is the financial, social, and environmental sustainability of the impacts a stated goal of your CSR programme? FOREWORD
(5) Are all the important partners who could help you achieve your CSR objectives sufficiently involved in the implementation?
The initiative we are taking in APINDO to make CSR practice more strategic in nature is taking several forms that include participating in IV. System instalment academic discussions and conducting in-depth research to identify best practices, which we then circulate to our members. These initiatives (1) Do you have an organizational structure in place within the company, with clear functions will hopefully move current CSR practices towards the ideal we are striving for. and responsibilities and does it also apply to the CSR programme? This study is one of the initiatives we have taken to make CSR practices in Indonesia more strategic. In cooperation with the Deutsche (2) Do you implement an adequate communication system that enables good levels of information Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, which has been supporting the private sector in the field of sustainable within your company and helps to safeguard the interests of each stakeholder? development and inclusive business, we have conducted a study of CSR practices among our member companies. We also would like to thank Indonesia Business Links (IBL) for assisting with its expertise in the field assessment of this study. In addition, we would like to (3) Do you ensure financial transparency among stakeholders and are all programmes equipped express a special thanks to the participating companies of the executed survey: PT. Adaro Indonesia, PT. Adis Dimension Footwear, PT. with adequate financial and human resources? HM Sampoerna, Tbk., PT. Pacific Place Jakarta, PT. Sinar Mas Tbk. (downstream), PT. Trimitra Baterai Prakasa, as well as PT. Unilever Indonesia, Tbk. (4) Do you implement an adequate monitoring and evaluation system to ensure periodic assess-
ments of the impact of your CSR programme against the company’s set objectives and key The study provides some insight into the current state of CSR in Indonesia and identifies opportunities and challenges for continued performance indicators? development of strategic CSR practices with a specific focus on inclusive business models. More importantly, this publication aims to raise awareness among businesses about opportunities for implementing strategic CSR by providing specific examples of best practice. (5) Do you encourage and give room for testing new ideas and innovations that might potentially
increase your positive impact and help you achieve your company’s objectives? The study also includes a self-assessment tool that any company can use to assess the current status of its CSR strategy, identify measures to make its CSR activities more strategic, and flag up potential for inclusive business models. V. Measurement and reporting
(1) Do you conduct periodic reviews of your CSR programmes?
(2) Do these reviews adhere to globally accepted standards (such as those of the Global Reporting Initiative? Hariyadi B. Sukamdani (3) Does the review of the CSR programmes impact an integral part of your company’s monitoring system? Chairman
(4) Do you consult with internal/external stakeholders to assess the full spectrum of the impact APINDO made by your business operations and CSR activities?
(5) Do you document best practices in the form of success stories and testimonials and share them with the business community and wider public?
42 07
From CSR to Inclusive Business From CSR to Inclusive Business VII. About the authors
APINDO - The Employer’s Association of Indonesia
The Employer’s Association of Indonesia (APINDO), established on 31 January 1952, is a national business organisation linked to the Indonesian National Chamber of Commerce (Kadin Indonesia) with a strong emphasis on labour-intensive industries.
APINDO has active chapters in 33 provinces and 222 districts in Indonesia. APINDO’s membership also includes other smaller sectoral industry associations in Indonesia with direct business links for supporting small and medium-sized enterprises (SMEs) in the manufactur-
Photo: APINDO ing and agriculture sectors. Its current national membership profile consists of around 14,000 companies.
At the national level, APINDO’s members include the large and important manufacturers and service industries, whereas at the regional level, they are mainly SMEs. APINDO, as the largest industry association in Indonesia, is regularly called upon by the Indonesian Parliament and the Indonesian Government to contribute its views on various policy priorities and the domestic reform agenda.
APINDO is also active in its participation in current CSR discussions and pays attention to CSR by collaborating with a number of partners, both national and international, in communicating the proper implementation of CSR to its members. For instance, with regard to SME development, APINDO is helping SMEs in the areas of promotion and marketing as well as the acquisition of financial resources.
APINDO states that Indonesian companies currently implement CSR in various forms, either as separate programmes unrelated to their business model or by incorporating several issues related to human rights, rights of workers or environmental issues in their CSR activities but still separate from their core business activities. Only a few Indonesian companies currently include CSR issues strategically in their business model.
APINDO believes that CSR activities that are not part of a company’s business model/core business will most likely fail. The Employers'Association of Indonesia (APINDO)
Over the past decade, we have witnessed an increase in corporate social responsibility (CSR) practices within companies in Indonesia. As a result, we in the Employers' Association of Indonesia (APINDO) have begun to classify the practices into different categories, such as charitable CSR, promotional/marketing CSR or strategic CSR. We believe that the latter will be beneficial for the businesses themselves as well as society and the environment. Going forward, we hope the trend in CSR practice in Indonesia is moving towards strategic CSR.
Amid these developments, however, we are facing the challenge that Indonesia appears to be moving in the opposite direction: the House of Representatives is currently discussing draft legislation that could make CSR mandatory for all companies and could even go so far as to stipulate what percentage of its funds a company should spend on CSR. As stated above, we in the business community believe that strategic CSR is the best way of contributing to sustainable development and we will continue to work towards ensuring this practice becomes firmly established.
06 43
From CSR to Inclusive Business From CSR to Inclusive Business Deutsche Gesellschaft für Internationale Zusammenarbeit SDGs Sustainable Development Goals (GIZ) GmbH SED-TVET Sustainable Economic Development through Technical and Vocational Education and Training Programme Responsible and Inclusive Business Hub (RIBH) Southeast Asia SMEs Small and Medium-sized Enterprises
The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH supports and partners with the private sector in the field of SNV Stichting Nederlandse Vrijwilligers / Netherlands Development Organisation sustainable development and inclusive business (IB). On behalf of the German Federal Ministry for Economic Cooperation and Development SRC Sampoerna Retail Community (BMZ), GIZ established a worldwide network of Responsible and Inclusive Business Hubs (RIBHs), currently operating from Cairo, Jakarta
and Pretoria. Furthermore, the RIBHs contribute to the global CSR discussion by building networks of CSR centres of excellence to convey WBCSD World Business Council for Sustainable Development
result-based methodological skills through German development cooperation.
The RIBH in Jakarta is promoting the joint engagement of enterprises and development programmes in tackling development challenges. In
its work, it aims at developing innovative approaches that advance collaboration between the private sector and development cooperation on
responsible business practices with a strong focus on IB.
RIBH believes that for companies, CSR means making core processes sustainable and using products and business models to address social and
environmental challenges.
Sustainable Economic Development through Technical and Vocational Education and Training Programme (SED-TVET)
The programme ‘Sustainable Economic Development through Technical and Vocational Education and Training’ (SED-TVET) is a joint effort
of German development cooperation and the Indonesian Ministry of National Education (MOEC), Ministry of Manpower (MOM) and the
Ministry of Industry (MOI). It aims at improving the employability of manpower, particularly of TVET graduates and underemployed youth,
in selected regions of Indonesia. The SED-TVET module implemented by the GIZ consists of four fields of activity related to improving the
regulatory framework, innovating for private sector cooperation, promoting TVET institutes’ excellence and establishing standards and
accreditation criteria.
Private sector cooperation is a key issue in the programme. The engagement of businesses enhances the quality of TVET, brings up-to-date
knowledge into the educational system and supports demand-oriented workforce development. However, despite the urgent human resources
recruiting and development issues, many companies do not invest in education prior to hiring but resort to training later or leaving positions
unfilled.
SED-TVET believes that since many businesses look towards education in their CSR activities, investment could be more strategically adjusted
to address recruitment and local workforce development needs. This would turn the investment into a win-win situation for businesses, training
institutions and graduates alike.
44 05
From CSR to Inclusive Business From CSR to Inclusive Business LIST OF ABBREVIATIONS VIII. Annex 1 – Participants in brief AND ACRONYMS PT. Sinar Mas, Tbk – downstream A division in Sinar Mas Agri-Resources and Technology (SMART) involved in processing all crude palm oil into value added products such as oleochemicals, palm cooking oil, margarine, and any other fat and oil products. ADB Asian Development Bank It currently has seven facilities around Indonesia (Surabaya – East Java, Marunda – DKI Jaya, Belawan – North Sumatera, Sampit – Kalimantan, Tajun – Kalimantan, Kotabaru – Lampung) APINDO The Employers’ Association of Indonesia / Asosiasi Pengusaha Indonesia http://www.smart-tbk.com/ BMZ German Federal Ministry for Economic Cooperation and Development PT. Adaro Indonesia, Tbk BOP Bottom of the Pyramid One of the largest local mining companies with a coal mining concession mainly in the Tabalong district, South Kalimantan. The company has mined and hauled for more than 20 years and current production amounts to 55 million tonnes annually. CEO Chief Executive Officer http://www.adaro.com/operation/our-operating-subsidiaries/mining-assets/ COT Centre for Occupational Training PT. HM Sampoerna, Tbk CSR Corporate Social Responsibility One of the largest tobacco companies in Indonesia producing kretek-clove cigarettes and white paper cigarettes. It is known for its Sampoerna
EVPA European Venture Philanthropy Association and Dji Sam Soe brands. In 2005 the company was acquired by Philip Morris, which owns more than 90% of the company. http://www.sampoerna.com/id_id/pages/homepage.aspx GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit PT. Adis Dimension Footwear GRI Global Reporting Initiative A long-established shoe manufacturing company working with the Nike and Adidas brands. It currently employs more than 6,000 workers in
IB Inclusive Business its facilities in Tangerang, West Java. adisdimensionfootwear.id/ ICT Information and Communications Technology PT. Pacific Place Jakarta ILO International Labour Organization A property company who manages and owns Pacific Place mall in Jakarta. The mall consists of Pacific Place mall, the One Pacific Place office ISO International Organization for Standardization centre, and the three-tower Ritz-Carlton Pacific Place hotel. The mall opened in November 2007. http://www.pacificplace.co.id/ MNC Multinational Company PT. Unilever Indonesia, Tbk. MNE Multinational Enterprise One of the biggest consumer products manufacturers in Indonesia. It was established in 1933 in Indonesia and its main products are food, personal NGO Non-Governmental Organisation care and home products. PT. Unilever Indonesia Tbk is a part of Unilever Group NV/PLC and produces, manufactures and sells most Unilever brands (Surf, Close-up and Clear, etc.) and some local brands such as Kecap Bango and Sari Wangi tea. OECD Organisation for Economic Co-operation and Development https://www.unilever.co.id/ PBSP Philippine Business for Social Progress PT. Trimitra Baterai Prakasa PHBS Pola Hidup Bersih dan Sehat / Clean and Healthy Lifestyle One of the largest automotive battery exporters in the South-East under the brand G-Force. The company was established in 1991 and the facility is located in Cilincing, North Jakarta. RIBH Responsible and Inclusive Business Hub http://www.trimitra-baterai.co.id/
04 45
From CSR to Inclusive Business From CSR to Inclusive Business IX. Annex 2 – Regulations V. CHAPTER 5 – CONCLUSION AND RECOMMENDATIONS 35
1. Limited Liability Company Act No. 40 of 2007. This law requires companies that work with natural resources to implement VI. CHAPTER 6 – CSR ASSESSMENT TOOL 37 social and environmental responsibility. These costs are to be budgeted and accounted for as cost companies.
2. Decree of the Minister of SOE Per-05/MBU/2007 on the Community Development Partnership Program (corporate VII. ABOUT THE AUTHORS 43 social responsibility). This decree establishes the state-owned enterprises (SOEs) to conduct a programme to strengthen small businesses through the provision of revolving funds and social assistance and through empowerment of VIII. ANNEX 1 – PARTICIPANTS IN BRIEF 45 community funds taken from the profits of SOEs.
3. Government Regulation (PP) No. 47 of 2012 on Social and Environmental Responsibility. This is the implementation provisions of Law No. 40/2007, Article 74 concerning the obligations of companies working with natural resources IX. ANNEX 2 – REGULATIONS 46 to implement social and environmental responsibility.
4. Investment Law No. 25 of 2007. Article 15 (b) of this law states that ‘every investor is obliged to implement corporate X. ANNEX 3 – REFERENCES 47 social responsibility’.
5. Law on Oil and Gas No. 22 of 2001. Article 13, paragraph 3 (p) of this law indicates that in the manufacture of Cooperation Contract shall be loaded principal provisions regarding the development of the local community to protect the rights of indigenous peoples.
6. Law No. 13 of 2011 on Poverty Management. This law does not focus specifically on CSR, but there is a clause that one source of funding in the handling of the poor is of the corporate sector.
7. Minister of Social Affairs Regulation No. 13 of 2012. This regulation covers the responsibility of the business forum in the implementation of social welfare. The regulation recommends creating the CSR Forum at the provincial level as a means of establishing partnerships between corporations and the government.
46
From CSR to Inclusive Business Table of Contents X. Annex 3 – References
Almuttaqi, Ibrahim (2013): ASEAN’s role in Corporate Social Responsibility. The Jakarta Post
LIST OF ABBREVIATIONS AND ACRONYMS 04 Asian Development Bank (2013): IB Impact Assessment Tool, http://www.inclusivebusinesshub.org/wp-content/uploads/ 2015/05/ADBSept2013IBimpactAssessmentToolforPHI2.pdf FOREWORD 06 ADB and SNV (2013): Developing the Business Case for Investing in Inclusive Business in Indonesia – A Market Scoping Study
I. CHAPTER 1 – ABOUT THIS STUDY 08 Center for Ethical Business Cultures (CEBC) (2005): Corporate Social Responsibility The shape of a history, 1945 – 2004: History of Corporate Responsibility Project Preliminary project planning paper 2005 Working Paper No. 1 Objectives 08
Respondents 08 Cornel B Juniarto, Hermawan Juniarto, Andika D Riyandi (2012): Corporate Social Responsibility Regulation in Indonesia. IBA Law Firm Management News Why corporate social responsibility is important for companies and sustainable development 09 Dees, J. Gregory (1998): Enterprising Nonprofits. Harvard Business Review: January – February 1998 Strategic corporate social responsibility and inclusive business 10
CSR 2.0 11 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2011):Corporate Social Responsibility and International Cooperation Inclusive business 12
Methodology 13 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2014): Responsible and Inclusive Business Hub SEA, Inclusive Business Mapping in Indonesia
II. CHAPTER 2 – DRIVERS OF CORPORATE SOCIAL RESPONSIBILITY IN INDONESIA 14 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2013): Inclusive Business Models-Options for Support through PSD Programmes Tradition and cultural expectation 14 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2015): Inclusive Business Toolbox-Promoting Regulation 14 Inclusive Business Models in Development Cooperation Programmes International corporate social responsibility guidelines 16 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2011): Promoting Inclusive Business Models for Sustainable Development-Experiences of German Development Cooperation III. CHAPTER 3 – ANALYSIS OF THE SAMPLE: GENERAL FINDINGS 18 European Commission, Directorate-General for Enterprise: Corporate Social Responsibility Awareness-raising questionnaire. Activity spectrum 18 https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0ahUKEwigr-WMqMXOAhVEtJQKHW Becoming more strategic 19 VlD54QFggqMAI&url=http % 3A%2F%2Fec.europa.eu%2FDocsRoom %2Fdocuments%2F10369%2 Fattachments% 2F1% 2Ftranslations %2Fen%2Frenditions%2 Fnative&usg=AFQjCNHgq142dHK6sJ--9PTkg20ZGbJqHA&cad=rja Five success factors 23 European Venture Philanthropy Association (2014): European Venture Philanthropy and Social Investment 2013/2014. The EVPA Survey IV. CHAPTER 4 – INCLUSIVE BUSINESS AS STRATEGIC CORPORATE SOCIAL G20 Development Working Group (2015): Annexes to G20 Inclusive Business Framework RESPONSIBILITY 29
Inclusive business case studies 29 Gentile, Federica (2014): Corporate Social Responsibility Regulation in Indonesia. Ubi Business
Opportunities 33 Gradert Marie and Engel Peter (2015): A Comparison of 4 International Guidelines for CSR, Danish Business Authority
Challenges 33 Hendeberg Simon and Lindgren Fredrik (2009): Bachelor Thesis: CSR in Indonesia - A qualitative study from a managerial Inclusive business potential 34 perspective regarding views and other important aspects of CSR in Indonesia
47
From CSR to Inclusive Business Hofland, Irene (2012): Research Thesis: The Relationship between CSR and Competitiveness: Indonesian Case. Indonesia Netherlands Association: University of Twente
Indonesia Business Links (IBL) (2005): Benchmarking Corporate Citizenship Practices in Indonesia
International Finance Corporation (2007): The Next 4 Billion. The market size and business strategy at the base of the pyramid
International Organization for Standardization (2014): Guidance on social responsibility: Discovering ISO 26000
Kemp, Melody (2001): Corporate Social Responsibility in Indonesia - Quixotic Dream or Confident Expectation? Technology, Business and Society Programme Paper Number 6: December 2001. United Nations Research Institute for Social Development (UNRISD)
Nelson, Jane (2015): Business and the Sustainable development Goals-Building Blocks for Success at Scale
Philippine Business for Social Progress (PBSP) Corporate Citizenship Center (2002): Corporate Citizenship System & Process Management Framework
Philippine Business for Social Progress (PBSP) Corporate Citizenship Center (2003): Benchmarking Corporate Citizenship Practice 2003 Report
Porter, Michael E. dan Mark R. Kramer (2002): The Competitive Advantage of Corporate Philantrophy. Harvard Business Review
PT. Adaro Indonesia (2013): Sustainability Report 2012-2013
PT. HM Sampoerna, Tbk. (2015): Annual Report 2015
Sivakumaran, Suba (2016): 10 misconceptions about inclusive business. http://www.theguardian.com/sustainable - business/ ten-misconceptions-inclusive-business-low-income-communities/.Accessed May 28th 2016
Smart Agribusiness and Food (2015): Annual Report 2014
The Global Reporting Initiative: A range of useful tools for interested companies https://www.globalreporting.org
The Guardian: 10-lessons-doing-business-base-of-the-pyramid-markets, https://www.theguardian.com/sustainable - business /10-lessons-doing-business-base-of-the-pyramid-markets
The PractionerHub for Inclusive Business (2016): Developing IB Checklist http://www.inclusivebusinesshub.org/ wp-content/uploads/2016/05/DevelopingIBChecklist_cobranded_forprint.pdf
United Nations Development Programme (UNDP) (2008): Creating Value for All: Strategies for Doing Business with the Poor
Visser, Wayne (2011): CSR 2.0: Transforming the Role of Business in Society. Lien Centre for Social Innovation.
48
From CSR to Inclusive Business Imprint
Published by APINDO
Gd.Permata Kuningan Lt.10 Jl. Kuningan Mulia Kav. 9C Guntur - Setiabudi Jakarta Selatan 12980 Indonesia
Tel. + 62 218378 0824 Fax + 62 218378 0823 / 8378 0746 [email protected] http://www.apindo.or.id/id
With the support of Sector Programme Cooperation with the Private Sector and CSR
Implemented by the Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) GmbH
On behalf of German Federal Ministry for Economic Cooperation and Development (BMZ)
Authored by APINDO GIZ
Design, Layout and Creative ROV Creative Media, Jakarta
Photo credits Photo credits are indicated on respective photo
Publication date November 2016 From CSR to inclusive business
